Standard Cost

Every item in LN must have a standard cost before you can generate orders for the item.

The item's standard cost is set up by logistic company or by enterprise unit if Standard Cost per Enterprise Unit functionality is active. The standard cost serves as a basis for the item's valuation price, can be calculated multiple times each day and stored with the item.

The standard cost is calculated in the Standard Cost Calculation (CPR) module. If you want to examine the effect of changes of the item in LN, you can also simulate costs for an item.

Calculating the standard cost of an item, requires information that affects the costs, such as the materials that are used for the item (derived from the bill of material (BOM)), the hours that are spent producing the item (derived from the routing), and the surcharges that apply (derived from the master data).

Note
  • If Standard Cost per Enterprise Unit functionality is active, standard cost is calculated per combination of item and enterprise unit.

  • For cost and service items standard cost is always defined at Company level.

  • If you select the Standard Costs Base check box for a specific item and enterprise unit combination in the Item - Costing (ticpr0107m000) session, the selected item's costing data is used as the item's standard cost base.

    If the Standard Cost per EU Mandatory check box in the Standard Cost Calculation Parameters (ticpr0100m000) session is cleared, and no item costing data is available for a specific item and enterprise unit combination, the standard costs base costing data is used.

  • BOM

    The bill of material (BOM) is used in cost calculation to determine the required materials to produce an item. An item BOM provides information on:

    • The materials of which the item consists.
    • The quantity of materials that is used for the item.
    • The scrap and yield on the materials.

    The bill of materials is linked to the item at company level and copied to the site along with the item. Note: the source of materials may vary by site, depending on the planning cluster linked to the item, consequently the cost of the materials may vary as well.

  • Routing

    The routing is used in cost calculation to determine the number of man hours and machine hours required to produce an item. An item's routing provides information on:

    • Which operations are carried out to produce the item.
    • The operations' setup time and cycle time.
    • The scrap and yield on the operations.
  • Surcharges

    Surcharges are estimates to cover for indirect costs during production, for example, the costs of order intake, the costs of inspections, or the costs of depreciation of machines and buildings. Surcharges can be defined for items or warehouses. For more information, refer to Surcharges.

    In LN, a standard cost calculation code stores the standard cost calculation data that is used to calculate the cost. The standard cost calculation code specified in the Standard Cost Calculation Parameters (ticpr0100m000) session, stores data to calculate the standard cost. Other cost calculation codes store the data for simulation purposes.

Standard cost with intercompany trade

If inventory is transferred between warehouses linked to different enterprise units, value may be added to the standard cost of the transferred item.

The added value depends on the defined intercompany trade relations between enterprise units, and the surcharge of the receiving warehouse.

If the Costing Source for the specified item in the Item - Costing (ticpr0107m100) session is Intercompany Transfer or Intercompany Purchase, you must specify the Supplying Enterprise Unit from which the transfer takes place.

For more information, see Intercompany trade - introduction

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