Configure Basic Product Costing Settings

If you do not select the check box, all material costs are displayed for costing component A01. If you select the check box, for each item type you must select which of the costing components A01–A03 to use. You do this in 'Item Type. Open' (CRS040/E).

Usually the purchase price of the direct material is used in the costing calculation. Any estimated overhead is then added by using costing components A04 and A05. However, if you suspect that the price might increase during the year, you can select this check box. This enables you to add the extra overhead by selecting option 12='Enter costing rates' for any of costing components A01–A03 in 'Costing Component. Open' (PCS001). You can still use costing components A04 and A05 for "regular" overhead.

These are the valid alternatives:

• 1 = Use date YY0101. You cannot change the date.
• 2 = Always propose date YY0101. You can change the date.
• 3 = Always propose date YYMM01. You can change year and month but not the day.
• 4 = Always propose date YYMM01. You can change the date.
• 5 = Always propose the current date. You can change the date.

A costing text is a user-defined comment that can be specified on several different levels. Its purpose is to document prerequisites for the costing calculation. The costing text is displayed on 'Product Costing. Display' (PCS300/E) when pressing F6.

The purpose of selecting the location is to minimize response times by avoiding unnecessary table reads.

These are the valid alternatives:

• 0 = No texts are displayed in (PCS300/E).
• 1 = The text entered for an item group in 'Costing Text. Open' (PCS155)
• 2 = The text entered for a product group in (PCS155)
• 3 = The text entered for a combination of costing type, costing date and order number in (PCS155). An example of the type of costing text to use here is documentation of the prerequisites for next year's standard costs. Since the order number is included with the costing type and date, you can make comments that could serve as quotation input, for example.
• 9 = Texts are entered in (PCS300).

You can also specify an additional text in 'Item. Connect Facility' (MMS003) for a specific item. Then specify the ID of the text block in the 'Costing text – item' field below.

You can always update the texts on (PCS300/E) manually after a costing run.

After a costing run, you can review and update the text by pressing F6 on (PCS300/E) and then select text category 'Item no'.

For example, you have three costing types: Budget (used to develop standard for the following year), Simulation (for simulations and tests) and Financial Standard. The latter costing type holds the standard cost to apply and is the one to select in this case.

If the subtotal is different to the number selected in the 'Subtotal – sales statistics' field, then sales and administration overhead is created based on cost of sales.

The subtotal number must have been selected for a costing element of type 3 in 'Costing Element. Open' (PCS015).

The cost price is the cost of an item used to calculate the contribution margin ratio for a customer order line on 'Customer Order. Open Line' (OIS101/E). The cost price updates the sales statistics during invoicing. Compare the field below.

The reason for not using the standard cost here is that the standard cost usually reflects the lowest production cost. In sales, a company can add an overhead to ensure that the product is not sold at a loss.

The cost is displayed as the cost price for the customer order line on 'Customer Order. Open Line' (OIS101/E).

For example, if a product has inventory cost of 100 and total cost of 110, using separate subtotal numbers for inventory accounting and sales statistics means that inventory is reduced by 100 and cost of sales is 110.

M3 calculates the ordering cost by multiplying the accumulated cost of certain costing components that have a cost driver equal to or larger than 41 and less than 98 with the order quantity. However, there are two prerequisites for including a costing component in this calculation. 1) It must have a cost driver equal to or larger than 41 and less than 98. 2) The 'Ordering cost' check box is selected on 'Costing Component. Open' (PCS010/E).

The subtotal is displayed and used on 'Product Costing. Simulate Sls Prices/CM' (PCS306/E). The program is reached by selecting option 23='Sales/cost simulation' for the costing calculation in (PCS300).

The subtotal is displayed and used on 'Product Costing. Simulate Sls Prices/CM' (PCS306/E).

Since each costing type is connected to a costing rate in (PCS100), you can use a different costing rate for operation transactions.

Provided that you have defined it possible to display and change the costing type for the work center on 'Work Center. Open' (PDS010/J), you can also specify the costing type manually when reporting operations in 'MO Operation. Report' (PMS070) or 'WO Operation. Report' (MOS070).

This way, you can create a cost variance for the operation without a difference in time or units.

For example, work performed at night usually costs more. You can get a better estimate of the cost for the order using a different rate for operations completed on the night shift, than by using the standard rate. Consequently, in this example you use a separate costing type called Overtime Premium with a different cost rate for the night shift.

While running the costing programs, it is possible to get warnings in case there is some information missing in the cost calculation. There are several settings in M3 Product Costing where you can activate or deactivate warnings. (PCS001) is the highest level where warnings can be selected. You can overrule costing warnings when you run a costing program such as 'Product Costing. Calculate Selected Items' (PCS200) for a specific product or range of products.

Current warnings can be displayed on a separate panel when specifying 'Product Costing. Display' (PCS300), provided that you have selected the 'Warning first' check box on (PCS300/P).

You can view warnings in 'Costing Warning. Open' (PCS325), a program reached through option 16 in (PCS300).Please note that warnings are displayed for all costing components, regardless of whether they are used in the costing model of the product. The reason for this is that values are always calculated for all components when the costing is run, and the ones that not are "accurate" receives a warning.

The field indicates whether to split the total cost into its costing components when calculating the cost of distributed items in 'Purchase/Distribution Costing. Calculate' (PCS280). The values in the product costing model for the item in the delivering facility are then copied per costing component to the receiving facility. If you do not select the check box, only one total cost is saved in the receiving facility.

If Cost Is Split

The structure of the distribution costing model as well as the product costing model in the receiving facility determine how any difference in cost between the two facilities is saved.

The product costing model for the item in the receiving facility must always contain an E costing component with cost driver 98 for the uplift cost (the difference in cost between the two facilities). To store the distribution cost separately, there must also be a costing component with cost driver 97 (valid for costing components E01–E10 and A04–A05). Both costing components must be placed before the subtotal representing the standard cost in the model.

The two scenarios below are based on a distribution costing model that has separate costing elements for internal transfer price and distribution-related costs (such as internal charges and overhead).

– In the first scenario, the product costing model has an E costing component with cost driver 98 that is reserved for the uplift cost. The entire difference in cost is saved separately for this costing component. In this case, this cost is the sum of the difference in cost due to the internal transfer price AND the distribution cost.

– In the second scenario, the product costing model has both an E costing component with cost driver 98 reserved for the uplift cost and a costing component with cost driver 97 reserved specifically for the distribution cost. The internal transfer price is then saved separately for the E costing component with cost driver 98 as the uplift cost, whereas the distribution cost is saved for the costing component with cost driver 97.

These are the valid alternatives:

• 1 = The cost is not updated if a cost already exists with the exact same value with the same or a previous costing date.
• 2 = The cost is always updated for the selected costing date, even if a cost already exists with this costing date.
• 3 = The cost is only updated if there is no cost with the same or a previous costing date.

For costing of purchased items through (PCS280), the costing base is defined in (CRS780) instead.

These are the valid alternatives:

• 1 = Purchase price in agreement in 'Purchase Agreement. Open' (PPS100). The agreement is identified based on the supplier specified for the item on 'Item. Connect Warehouse' (MMS002/F).
• 2 = Purchase price in the item/supplier file, 'Supplier. Connect Item' (PPS040).
• 3 = Purchase price in the item file, 'Item. Open' (MMS001).
• 4 = Average cost.
• 5 = Net price on the latest invoice in the purchasing statistics that is recorded on the date specified in the 'Purchase price date' field on 'Purchase/Distribution Costing. Calculate' (PCS280).
• 6 = The price that is the lowest of the average cost (alternative 4) and the invoice price (alternative 5). If one of these values is 0, the other one is selected.
• 7 = Cost in supplying facility.
• 8 = Internal transfer price.