Manually Entering Cost Rates for Costing Components

Outcome

Cost rates for costs related to operations per work center, tools, material overheads, common product costs, and subcontracting are defined.

Once the cost rates are set and the costing model is built, you can calculate the product costs.

See the respective subordinate settings document for details.

Before you start

• The company must have a realistic estimate, based on a previous analysis, of the production-related costs it wants to include in the product costing, such as costs for labor time. The estimate must specify an average cost rate for each cost to measure.
• Costing types must be defined in 'Costing Type. Open' (PCS005).
• Costing components must be defined in 'Costing Component. Open' (PCS010).
• If you want to set cost rates for specific work centers, those work centers must be defined in 'Work Center. Open' (PDS010).
• Tools must be defined in 'Item. Open Toolbox' (MMS200) to allow calculation of tool-related costs.
• The tools must also be connected to the product structure. You connect the tool by selecting the related option 19 for a type-3 operation element in 'Product. Connect Materials/Operations' (PDS002), which is a subprogram of 'Product Structure. Open' (PDS001).

Follow These Steps

Use the these options to enter cost rates for costing components for different categories of costs.

1. Enter Cost Rates for Material Overhead (A Costing Components)

   1. Enter cost rates for material overhead for cost drivers connected to components A04 and A05 in 'Costing Component. Enter Material O/H' (PCS115).

      Since costing components A01–A03 retrieve their direct material cost from the purchased items when you run 'Product Costing. Calculate Selected Item' (PCS200), you do not enter rates for them.

      Note:  With all the costing rate programs in these activity descriptions, you can display the corresponding program by selecting the 'Enter cost rates' option for the costing components in 'Costing Component. Open' (PCS010/B).

2. Enter Cost Rates for Operation Costs (B Costing Components)

   1. For B costing components (B01–B14), you define rates for operation costs for labor and machine hours (excluding subcontract cost and tool-related costs). The cost rates apply to the work centers that are included in the product structure of the product whose cost you have chosen to calculate. You can target the costing rates by also including entities other than work centers as cost distribution keys, such as product group and warehouse.

   2. Enter cost rates in 'Costing Component. Create Cost Rates' (PCS120).

3. Enter Cost Rates for Tools (C Costing Components)

   1. Enter rates for tools related to costs for C components (C01–C02). The cost is automatically connected to the work centers in the product structure.

   2. Define cost rates in 'Costing Component. Enter Tool Cost' (PCS105).

4. Enter Cost Rates for Subcontracting (D Costing Components)

   1. Define cost rates for the material overhead rate for D costing components. Costing components D01–D02 are used for costs related to subcontracting. Costing component D01 is associated with the direct material costs for subcontract operations, whereas costing component D02 retrieves the subcontract overhead costs.

      Note: The cost of D01 is calculated based on one of these prices:

      The unit price entered in 'Product. Connect Materials/Operations' (PDS002), or

      An agreement with the supplier entered in 'Supplier. Connect Item' (PPS040) or 'Purchase Agreement. Open' (PPS200).

5. Enter Cost Rates for Subcontracting (D Costing Components)

   1. Enter the cost rates in 'Costing Component. Enter Material O/H' (PCS115).

6. Enter Cost Rates for Common Product Costs (E Costing Components)

   1. For E costing components (E01–E10), define cost rates for "common" product costs that are not related to material, labor, tools, and subcontracting.

      Note: An important characteristic of E costing components compared to other costing components is that the cost is not included in Work in Progress (WIP) in M3 Cost Accounting.

   2. Enter cost rates in 'Costing Component. Enter Product O/H' (PCS120).