Cost Component Scheme in Manufacturing

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.

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.

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.

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.

• Operation costs are booked on the cost component as defined in the Operation Rates (ticpr1150m000) session.
• Material costs are booked on the materials' cost components. You can view the cost components in the Item Inventory - Cost Details (whwmd2517m000) session.
• Surcharges are booked on the cost component as defined in the Item Surcharges (ticpr1110m000) session.

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.