Understanding Standard Cost Calculation in Business Central: Top Levels vs. All Levels

Understanding Standard Cost Calculation in Business Central: Top Levels vs. All Levels

When calculating the standard cost of finished goods in Business Central, you might encounter a prompt asking you to choose between "Top levels" and "All levels." Understanding the difference between these options is crucial for accurate cost calculation. Additionally, you might come across the term "low-level code." This blog post will explain these concepts and their implications for your cost calculations.

Top Levels vs. All Levels

When calculating the standard cost, Business Central provides two options:

• Top Levels: This option calculates the cost only for the immediate components of the finished goods. It does not consider the costs of subcomponents in lower levels of the Bill of Materials (BOM).

• All Levels: This option calculates the cost for all levels of the BOM, ensuring that the costs of all subcomponents are included in the finished product's total cost.

Example: Calculating Standard Cost

Let’s consider an example to illustrate the difference:

1. Finished Product (Level 0):
   • Consists of Subassembly A (Level 1) and Component B (Level 1).
2. Subassembly A (Level 1):
   • Consists of Component C (Level 2) and Component D (Level 2).

If you choose Top Levels, Business Central will calculate the cost of the finished product based on the costs of Subassembly A and Component B only. It will not include the costs of Component C and Component D, which are part of Subassembly A.

If you choose All Levels, Business Central will calculate the cost of the finished product by considering the costs of all components, including Component C and Component D. This ensures that the cost of Subassembly A is accurately rolled up into the cost of the finished product.

Low-Level Code

The low-level code is used to ensure that Business Central accurately calculates costs at the lowest level of the BOM. Running a batch to calculate low-level codes organizes the BOM structure, ensuring that all subcomponents are accounted for in the cost roll-up.

Why Run Low-Level Code Calculation?

Running the low-level code calculation ensures that Business Central can traverse to the lowest level of the BOM. For example, if you have a BOM with 10 levels of semi-finished components, running the low-level code job ensures that all levels are considered in the cost calculation. Without running this job, Business Central might stop at level 8, leading to an inaccurate total cost.

Practical Advice

• All Levels: Always opt for calculating costs at all levels to ensure all costs are rolled up to the finished product. This ensures accuracy and avoids missing costs from lower-level BOM/routing items.

• Top Levels: This option might save system resources, but it risks incorrect cost roll-up as it excludes lower-level components. Use this option only if you are certain that lower-level costs do not significantly impact the total cost.

Conclusion

Accurate cost calculation is essential for effective financial management in Business Central. Always choose to calculate costs at all levels to ensure comprehensive cost roll-up. Additionally, running the low-level code calculation ensures that costs from all BOM levels are included, providing a true picture of the finished product’s total cost. By understanding and using these features correctly, you can maintain precise cost records and make informed financial decisions.