Dynamic 365 Business Central: Using SKU-Based Standard Costing for Production Output

Views (0)

Khushbu Rajvi.

21,537 Super User 2026 Season 1

Like(0)

Report

Manufacturing costs often vary based on location, variant, or production process. A single item may be produced using different machines, routes, or components, each affecting the final cost. To handle this complexity, Business Central provides the ability to calculate standard costs at the Stockkeeping Unit (SKU) level using production BOM and routing versions.

This ensures more accurate and realistic manufacturing costing.

Why Use Standard Cost?

A production can represent:

A different item variant
A different production location
Alternative machines or production lines
Different components or subcontracting steps

Each of these factors can significantly impact cost. Using item-level standard cost alone may not reflect these variations accurately.

Feature Overview

With this feature enabled, Business Central:

Calculates standard cost using SKU-specific BOMs and routings
Applies the correct cost during production output posting
Improves cost accuracy for variant- and location-based manufacturing

Setup: Enable SKU-Based Costing

To enable this feature:

Open Manufacturing Setup
Turn on Load SKU Cost on Manufacturing

This tells the system to use SKU-level costing instead of item-level costing during production.

How to Calculate Standard Cost

Once enabled, standard cost is calculated from the Stockkeeping Unit Card.

Steps:

Open the Stockkeeping Unit Card
Go to Actions → Functions
Select Calc. Production Std. Cost

The system calculates costs based on the BOM and routing defined for that SKU and version.

Cost Fields Updated by the System

Single-Level Costs (current level only)

Single-level Material Cost
Single-level Capacity Cost
Single-level Material Non-Inventory Cost
Single-level Subcontracted Cost
Single-level Manufacturing Overhead Cost
Single-level Capacity Overhead Cost

Rolled-Up Costs (including subassemblies)

Rolled-up Material Cost
Rolled-up Capacity Cost
Rolled-up Material Non-Inventory Cost
Rolled-up Subcontracted Cost
Rolled-up Manufacturing Overhead Cost
Rolled-up Capacity Overhead Cost

This gives a complete and structured view of how costs are built.

Important Notes & System Behavior

For subassemblies, the system still uses item card cost
The Standard Cost Worksheet does not support SKUs
During production posting:

If a SKU exists → SKU cost is used
If no SKU exists → Item cost is used

Conclusion

SKU-based standard costing in Business Central bridges the gap between planning and real-world production. By using BOM and routing versions at the SKU level, businesses gain better control, visibility, and confidence in their manufacturing costs.

This feature is especially valuable for organizations with complex, distributed, or variant-driven manufacturing operations.

Thanks for reading...!!😊

Regards,

Khushbu Rajvi

This was originally posted here.

Comments

*This post is locked for comments

Community site session details