Cost calculation methods
The cost calculation method determines how a product structure is analyzed during the calculation of the standard cost and valuation price.
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In a multisite environment Standard Cost by Enterprise Unit parameter in the Implemented Software Components (tccom0100s000) session is activated. The standard cost is maintained for an item and enterprise unit combination.
- The item costing data for cost and service items is always maintained at Company level.
The BOM that follows is used to explain the calculation methods:
Top-down LN calculates the standard cost of each item that affects the standard cost of the selected item. During a cost calculation, LN analyzes the structure of the item.
Example
When the standard cost of item C in the example is calculated, LN calculates the standard costs of items E, D, and B in this sequence.
A single level calculation is similar to the top-down method, but the expansion of the bOM stops at the first level (F and C). The standard cost of the underlying items is not recalculated (F and C are not recalculated). The standard cost and valuation price of the existing underlying structure are adopted as is.
Example
When the standard cost of item C is calculated, LN reads the prices of items D and B in the Item - Standard Cost Details (ticpr2505m000) session.
In the bottom-up calculation method: LN searches the product structure for items whose standard cost is affected when the standard cost for the main item changes.
If item B is the starting point, items C then A are recalculated. When the calculation is executed in that order, with bottom level items first, the updated standard cost can be read for the higher levels during the calculation process.
The prices of items that are on a lower level in the BOM are not calculated, but are read in the Item - Standard Cost Details (ticpr2505m000) session.
Example
When the price of item B in the above figure is calculated, the price of items A and C will also be calculated.