Production Costing Sheet

Hi All,

This blog post is about the Production order Costing Sheet. Before we set up the cost sheet, we need to know the couple of definitions which will help us to better understand the setups and configurations in the system.

What is the purpose of Cost Sheet?

• Cost sheet is used to display the Cost of goods sold information about a manufactured item or the production order. Cost sheet shows the material, labor and overhead cost of the manufactured item based on cost groups.
• In order to configure the cost sheet, we need to set up the cost groups first.

What are the Cost groups?

Cost groups provide the basis for segmenting and analyzing cost contributions in a manufactured item’s calculated cost, such as the cost contributions for material, labor, and overhead. Cost group segmentation has several synonyms within manufacturing environments, such as cost breakdown, cost decomposition, or cost classification. (Technet)

What is the purpose of Cost Group?

• Cost groups assigned to the item (material cost), cost categories for routing operations, and indirect cost calculation formula. 
• Note: Cost sheet format must be defined if the indirect costs will be calculated

Cost Group Assignment: Cost groups can be assigned to the material, operation resources or overheads

Here is the step by step process with Screen short for the costing sheet setup.

First, we need to create the cost groups for Cost group type: Direct material, Direct manufacturing and Indirect 

Path: Inventory management> costing> cost groups

1.Cost Group Type: Direct Material

• Create all possible cost groups for the cost group type "Direct material"
• Material cost like packing material, raw material or components; the cost group assigned to ITEMS
  
  

2.Cost Group Type: Direct Manufacturing 

• Create all the cost groups for "Direct Manufacturing"
• Operation Resources like labor and machine; create the the cost groups for all the labour and machine and assigned these cost groups to COST CATEGORIES
  
  
  
  

3.Cost Group Type: Indirect

• Create all the indirect cost group with cost group type "Indirect"
• Overhead costs like labor and machine related overheads, the cost group assigned to INDIRECT COST
• Overhead cost defined in the cost sheet directly 
  
  

Assignment of Cost Groups To Item, Cost Categories, and Costing Sheet

1.Assign Cost Group To Item(Direct Material)

The cost group created for the cost group type(Direct material) needs to be assigned with the item, below is the SS 

2.Assign Cost Group to Cost Category(Direct Manufacturing) 

The cost group created for the cost group type(Direct manufacturing) needs to be assigned to the cost category available in the production module 

First, create the shared category and make sure to mark the check "Can be used in Production.

Also, select the cost category ID and associate the worker and "Cost group" with cost category

Press Price and enter the Cost category price for cost categories 

3.Assing Cost Group To Costing Sheet (Indirect)

Costing Sheet Setup

We can create the costing sheet based on the customer requirement. It depends how the customer wants to present the cost breakdown for the manufactured item.

Total Direct cost contains the following nodes: Direct machine, Direct labor, and Cost of Direct Material. 

Direct Machine

For direct machine create node type "Total", this will present the Total for the Direct machine.  

Create the Direct machine subnode for cost group "Conventional milling and turning"

Direct Labor

Create the Header and total for Direct labor 

Associate the cost group labor 

Direct Material

Create the header and Total for Direct material 

Associate the cost group for direct material

Overheads

For the overheads, create the node type "Cost group" and associate the cost group "Warranty"

The node type for Warranty is "Surcharge", which will be calculated on Total (Per item) basis

Calculation for warranty based on total direct cost (2% of total direct cost)

Based on the setups in the costing sheet, the system will calculate the cost for the finished good item 

Below is the SS for price calculation

Also, here is the calculation details for the indirect cost based on the setups in the costing sheet

If you have any question related to setups and configurations feel free to contact. 

Regards,

Ali Danish

Mobile/WhatsApp: +971554912688