Cost Component Scheme in Manufacturing

A cost component scheme is a mandatory structure that specifies the breakdown of the cost of an item to the level of detail you want, using cost components. You can define this structure in the Cost Component Scheme (ticpr0109m000) session.

In the Standard Cost Scheme Details (ticpr0110m000) session, you can collect all the cost components of the type Collect in a scheme.

In other words, in the cost component structure, you can break down the cost to the level of detail you want: from completely aggregated to a detailed breakdown.

Cost components are also used to:

  • Compare estimated and actual production order costs.
  • Express production variances.

Cost component codes are defined in the Cost Components (tcmcs0148m000) session, and assigned to one of the cost types:

  • Operation Costs
  • Material Costs
  • Surcharge
  • General Costs
  • Not Applicable

You must link a cost component of the applicable costing type to all entities in LN that are accountable for costs: materials, operations, surcharges, labor, and so on.

Note

  • If Standard Cost per Enterprise Unit functionality is active, a cost component scheme is linked to a item and enterprise unit combination.

    Cost and service items of which the costs are not enterprise unit related, cannot be linked to an enterprise unit. The costs of these item is calculated on Company level.

  • The cost component type Not Applicable is used in Project and Service.

Cost component structure set up

  1. Define four cost components of the component type Aggregated with the cost types Operation Costs, Material Costs, Surcharge, and General Costs in the Standard Cost Scheme Details (ticpr0110m000) session.

    The aggregated cost components are used to represent the total amounts per item and cost type.

  2. Define four cost components of the component type Collect with the cost types Operation Costs, Material Costs, Surcharge, and General Costs in the Standard Cost Scheme Details (ticpr0110m000) session.

    Select Yes in the Collect in Scheme field.

    Note: If you do not specify cost components of type Detail, or Collect with the Collect in Scheme set to No, all costs are broken down on the cost components with the Collect in Scheme set to Yes.

  3. Define cost components of type Collect with the Collect in Scheme No and the Cost Component field set to Detail in the Standard Cost Scheme Details (ticpr0110m000) session.

    Note: This step is optional.

Note

Four cost components of the type Aggregated and Collect are mandatory for a valid cost scheme.

Cost Component scheme validation

You must validate a new or modified cost component scheme before use. A cost scheme must be valid before it can be linked to an item.

The validation process for individual schemes is initiated from the Cost Component Scheme (ticpr0109m000) and Cost Component Scheme (ticpr0609m000) sessions, and the validation of multiple schemes simultaneously in the Validate Cost Component Schemes (ticpr0209m000) session.

To be valid, the cost component scheme must contain:

  • Four Aggregated cost components of these types:

    • Operation Costs
    • Material Costs
    • Surcharge
    • General Costs

  • Four Collect cost components with the Collect in Scheme field set to Yes:

    • Operation Costs
    • Material Costs
    • Surcharge
    • General Costs

A valid cost component scheme has the Validated check box selected, and the date of validation displayed in the Last Validation Date field.

If you modify a cost component scheme, the Validated check box is cleared and the date displayed in the Modified field in the Cost Component Scheme (ticpr0109m000) and Cost Component Scheme (ticpr0609m000) sessions.

If the cost components scheme is modified, but not validated, the modifications can be removed using the Undo Scheme Modifications option. Modifications are effective only once the cost component scheme is validated.

Note

You can only use validated cost component schemes in the Item - Costing (ticpr0107m000), and Assembly Line Costing Data (ticpr0115m000) sessions.

Booking costs on cost components

During production of a manufactured item, all costs are booked on the cost component to which the costs are linked. These cost components can differ from the cost components in the end item's cost component structure.

After production, if you report an order as complete and the items are received in the warehouse, the costs are booked on the cost components as defined in the end item's cost component structure. If the Moment of Completion Posting field in the Production Orders (tisfc0501m000) session is Quantity Completed, the costs are booked as soon as a quantity of the production order is reported completed.

Example
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Explanation:

If you defined a detailed cost component SURCH_C for component item C in the Standard Cost Scheme Details (ticpr0110m000) session, and you want to report the costs posted to the detailed cost component SURCH_C separately for end item A, you must also define cost component SURCH_C in the chart details for end item A. If you do not define a cost component SURCH_C for item A, cost component SURCH_C becomes part of item A's aggregated cost component SURCH_A. You must define the detailed cost components of an item's cost component structure in the Standard Cost Scheme Details (ticpr0110m000) session.

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