In this task your personnel involved with product costing will update estimated product costs.
Education:
Product Costing Guide - Absorption Costing and Shop Rates
Product Costing Guide - Product Costing Guidelines
Absorbed Costs Screenshot Series
Training Tasks:
•Update P item estimated costs using a mass update of the default supplier price in the BOM > Estimated Purchase Cost screen
•Update subcon routing sequence values in the BOM > Estimated Subcontract Costs screen
•Update Shop Rates using dummy numbers for labor and overhead costs
•Run a batch Cost Rollup.
Product Costing Guidelines:
Perform cost rollups at frequent and regular intervals
Roll up estimated costs at frequent and regular intervals to insure that estimated job costs reflect current work center rates and component costs.
How often should costs be rolled up?
The Cost Rollup should be run weekly or whenever you’ve made changes to BOM routing details, shop hourly rates, or purchased item estimated costs. You can run the Cost Rollup as often as you wish because it has no effect on inventory value or any other accounting numbers.
You must actively update your estimated costs for Purchased items
▪Verify pricing for your default supplier sources when you send out purchase orders from the MRP screen
▪If any default purchase prices change during MRP, go to the BOM > Estimated Purchase Cost screen and Mass Replace the Est Cost based on Default Supplier Price.
▪Run BOM > Cost Rollup Batch to reflect updated estimated material costs across all BOMs. Make sure to apply the Batch Cost Rollup changes to your un-released Jobs to ensure your MRP Jobs estimated costs are aligned with your recently updated MRP PO prices.
You must actively update your Routing costs
▪Periodically (ie Quarterly) review your Shop Rates for Labor and Mfg Overhead
▪Update your Routing cycle times to reflect reality on an ongoing basis
▪Update your Subcontract service pricing in your Estimated Subcontract Costs screen
▪After any changes above, run BOM > Cost Rollup Batch to reflect your Labor, Mfg OH, and Subcon costs across all BOMs
You must actively update your Est Costs for Secondary Outputs
▪If you have Secondary Outputs, after each Batch Cost Rollup you should go to the BOM > Estimated Secondary Costs screen
oSecondary Outputs used in a single parent BOM, the Est Cost can be calculated using the Mass Replace button
oFor Secondary Outputs used in more than one parent BOM, review the Secondary Output Estimated Costs Inquiry and manually enter a reasonable Estimated Cost.
▪After update of Est Costs for Secondary Outputs, return to the Cost Rollup screen and perform a batch rollup to update all places where a secondary output is defined as an input.
Never attempt to adjust past costs
Even when large variances are reported in the Shop Rates screen, never attempt to adjust past costs by reopening jobs or reversing invoices or any other means. These are harmful practices that do not work and cause numerous accounting problems. Large variances are properly handled by variance accounts and do not require correction. Past labor and overhead costs are usually in closed accounting periods and have long ago been co-mingled with other costs and absorbed into the cost of other items.
Do not devise your own costing method
WIP accounting is not compatible with any other costing method. If you are accustomed to some other method in your previous system, do not attempt to replicate it in any form or fashion within DBA.
Do not use the sales order for costing or planning
Do not use the sales order for costing or planning purposes. This practice yields false numbers, promotes inefficient job planning, and compromises the integrity and effectiveness of DBA’s WIP accounting system. Sales orders should only be used to establish sales demand in terms of quantities and required dates and to establish selling prices.
