Your estimated costs for your manufactured items are updated in the BOM > Cost Rollup screen. It is imperative that you have accurate estimated costs regardless of your style of manufacturing.
Estimated Cost Benefits
•Estimated item costs are broken out into four major cost elements – material, labor, subcontract services, and manufacturing overhead – so that you have an accurate cost profile for making pricing decisions.
•Labor, subcontract service, and manufacturing overhead costs are absorbed into the inventory cost of the items you make so that you get an accurate cost of goods sold at the item level
•An accurate estimated cost on subassembly items (BOMs that go into other BOMs) is an important element in the calculation of estimated job costs for comparison with actual job costs.
| • | The cost management process – refining routing cycle times, refining shop hourly rates for direct labor and manufacturing overhead, and updating purchased item estimated costs – keeps you focused on costs and their implications. |
Cost Rollup does not affect inventory value
The Cost Rollup has no direct affect on inventory value or any other accounting numbers. Inventory value for your manufactured items is always based on the Job Receipt costs. Timely and continuous updates of your estimated costs does ensure that you estimated Job costs and Job Receipts more closely match your objectives.
Estimated Costs Overview
Estimated Costs for Purchased items are updated on an ongoing basis
1.Verify pricing for your default supplier sources when you send out purchase orders from the MRP screen
2.After any changes in supplier prices, run Mass Replace the Est Cost based on the default supplier price in the BOM > Estimated Purchase Cost screen.
Estimated Costs for your Manufactured items are always rolled up in BOM > Cost Rollup
1.Material Costs come from estimated costs of purchased items (see above)
2.Labor and Mfg OH costs come from Shop Rates and cycle times in Job Routings
▪Periodically (ie Quarterly) review your Shop Rates for Labor and Mfg Overhead
▪Update your Routing cycle times to reflect reality on an ongoing basis
3.Subcontract costs come from Subcon Routing sequences and can be managed in the BOM > Estimated Subcontract Costs screen
Constant Refinement of Estimated Costs
Manufacturing is a practice of constant refinement and improvement. You will want to dedicate yourself to constant review and continual feedback of your estimated costs to improve and hone them over time. Your job estimated costs will serve as the basis for your receipt costs, inventory value, and cost of goods sold. You will want to regularly run BOM > Cost Rollups after you perform any of the above processes.
