Costing Breaks

For projects involving production or service of an item (such as depot repair service), the user is required to monitor unit costs at various levels.

Costing breaks provide a flexible method to view the breakup of unit costs at various levels in a project WBS. You can use costing breaks to move the unit costs from the top demand project pegs to other project WBS levels. You can also identify other specific cost types such as labor, material, subcontracting, and so on to redirect the unit costs to the other WBS levels.

You can register the costing breaks for:

  • Manufacturing: for the Bill of Material (BOM) components of the item
  • Service: for the As-built structure of the service item

LN allows you to create multiple costing breaks for a project. When you create a costing break at a particular level in a project WBS, all the lower levels of the BOM inherit the costing break WBS links unless another costing break exists at the lower level in the BOM structure.

Example

A project PRJ001, with the element E and activity A, involves production of the End Item with the following components in the bill of material (BOM):

  • Assembly
  • Sub-Assembly 1 & Sub-Assembly 2
  • MFG Comp 1, MFG Comp 2, MFG Comp 3 and MFG Comp 4
  • Pur Comp 1 and Pur Comp 2

The peg distribution for the project is initially at the top demand item level (in this example at the End Item).

Costing breaks are created at the following levels:

  • Costing Break 1 - at Sub-Assembly 1
  • Costing Break 2 - at MFG Comp 1
  • Costing Break 3 - at MFG Comp 2
  • Costing Break 4 - at Pur Comp 2

You can collect and view the unit costs for:

  • MFG Comp 1 at the Costing Break 2 (linked to peg PRJ001, E10, A105) instead of the Costing Break 1 (linked to peg PRJ001, E10, A101) as the Costing Break 1 is replaced by the lower level Costing Break 2.
  • MFG Comp 2 at Costing Break 3 (linked to peg PRJ001, E10, A110) instead of Costing Break 1 (linked to peg PRJ001, E10, A101).
  • Pur Comp 1 at Costing Break 2 (linked to peg PRJ001, E10, A105) as there is no costing break created at Pur Comp 1.
  • Pur Comp 2 at Costing Break 4 (linked to peg PRJ001, E10, A115).

For the Sub-Assembly 2, MFG Comp 3, and MFG Comp 4, you can view the break up of unit costs at the top demand item level (the End Item linked to the peg (PRJ001, E10, A100)).

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