D365F&O | Process Manufacturing | Prerequisite Setups|Part II

Hi Everyone,

Greetings!

This is the Part II of blog post for Dynamics 365 Finance and Operations (D365F&O). The purpose of this blog is to list down the series of prerequisite setups and configurations for process manufacturing industries. 

In Part II of the series, I will cover the following setup topics

• Cost Group
• Cost Shared Categories
• Cost Categories

Cost Group

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. 

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

Below is the SS for the cost group, Below cost groups will be used in this demo

• Cost group type − A cost group that is designated as the direct material can be assigned to items. A direct manufacturing cost group can be assigned to cost categories. A direct outsourcing cost group can be assigned to a product type of service so that you can classify costs that are associated with the service purchase to subcontracting activities.
  
  An indirect cost group can be assigned to indirect costs for surcharges or rates. A cost group that is designated as undefined can be assigned to items, cost categories, or indirect costs.
  
  The assignment of a cost group type serves several purposes. First, it constrains the ability to assign a cost group and to view a list of applicable cost groups. Second, it provides supplemental segmentation for reporting purposes. Third, it can be used to assign ledger accounts for variances.
  
  
• Behavior − Each cost group can optionally be assigned a behavior to indicate that the cost group applies to fixed costs or variable costs. A cost group that has a null value for behavior is treated as a variable cost. The assignment of a behavior serves only a reporting purpose.
  For example, costs can be displayed with segmentation of fixed and variable costs on the costing sheet and on the Cost rollup by cost group page. If you assign a profit setting percentage to each cost group, the bill of materials (BOM) calculation provides a suggested sales price, based on a cost-plus-markup approach.

M: Material &

OVH: Overheads

Cost Shared Categories

The cost-shared category setup form will be used to define either this cost category will be used in the production or not. 

Cost Categories

Cost categories apply to manufacturing environments that use routing. They are assigned to operations resources and routing operations to define hourly costs and to segment cost contributions in a manufactured item’s calculated costs.
The cost groups that are assigned to cost categories classify manufacturing cost contributions, based on the operation resources and the type of activity, such as setup time and run time. The specificity of cost group assignments enables manufacturing overhead to be calculated based on routing information.

Note: In manufacturing environments, cost categories are known by several other names, such as labor rate codes or machine rate codes.

Create the list of cost categories and define the ledger accounts for absorbed cost and WIP clearing accounts. 

If you have any question related to these setups feel free to contact

Thansk,

Ali Danish

Microsoft Dynamcis 365 Finance & Operations Consultant

Mobile: +971554912688