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Dynamics 365 Community / Forums / Small and medium business | Business Central, N... / Breakdown of COGS
Small and medium business | Business Central, N...
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Breakdown of COGS

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Posted on by Richard Xpol 4
Hi,
 
We are a company in the horticultural industry. We are producing customer ready bouquets for retail chains. Is it in any way possible to get a breakdown of COGS? I.e. we have setup Inventory valuation and direct posting to G/L. However all inventory postings result in a lump sum amount on COGS account. I would like to have insight in the breakdown of all relevant costs added to inventory costs (item charges like airfreight, labour etc). Is that possible?
 
Regards,
Richard
  • Richard Xpol Profile Picture
    Richard Xpol 4 on at
    Breakdown of COGS
    Hi Valentin,
     
    Thanks for the feedback, We will then have to decide whether we can use the cost to G/L function. As it messes up my COGS breakdown.
     
    Regards,
    Richard
  • Suggested answer
    Valentin Castravet Profile Picture
    Valentin Castravet 24,785 Super User 2024 Season 2 on at
    Breakdown of COGS
    In the system there is a Cost Shares Breakdown report. This report will breakdown COGS into material, labor, and overhead. I wrote a blog post about this report here. This report is going to show you the breakdown between these 3 cost sources that you had on your production order. 
     
    However, this report is not going to split the material cost between actual cost and item charges. But this is possible to do if the report is customized. Alternatively, you can build a similar report using a third party reporting tool such as Jet Reports or Power BI. Unfortunately, I don't believe any out of the box report is going to show you the split between actual cost and item charges. 
     
  • FX-03070658-0 Profile Picture
    FX-03070658-0 6 on at
    Breakdown of COGS
    Hi Matteo,
     
    We do already apply item charges in the way you describe below. However, I don't see how I can use the reports to show a proper breakdown of COGS. The reports show me the change in valuation of inventory based on purchase invoices of e.g. an airfreight invoice, but they don't reflect the COGS for the same item charges. 
     
    E.g. when I receive an invoice for airfreight of EUR 1000 in period 1 and I allocate this to a purchase order, and I consume 50%  of that purchase order for production and sales in period 1 and 50% in period 2, how should I use those reports to show me that EUR 500 of COGS is airfreight? Item Charge Assignment report only shows me that the airfreight invoice of EUR 1000 is allocated to a specific purchase order in period 1 and therefore is increasing inventory value for the same in period 1.
     
    Rgrds,
    Richard
  • Matteo Fiocco Profile Picture
    Matteo Fiocco 97 on at
    Breakdown of COGS

    Hi Richard,

    Yes, it's definitely possible. Here’s how you can achieve this:

    1. Using Item Charges

    Item charges allow you to add costs such as airfreight, labor, and other additional costs to the value of your inventory items. By doing this, you can ensure that the costs are accurately reflected in your inventory valuation and subsequently in your COGS.

    Steps to Set Up and Apply Item Charges:

    1. Set Up Item Charges:

      • Go to "Item Charges" page.
      • Define the various item charges you want to track (e.g., Airfreight, Labor).

    2. Assign Item Charges to Purchases:

      • When posting purchase invoices, you can assign these item charges to the relevant inventory items.
      • Navigate to the "Purchase Invoice" page.
      • Enter the purchase lines as usual.
      • Add a new line for the item charge.
      • Use the "Item Charge Assignment" function to distribute the charge to the appropriate items.

    2. Tracking and Reporting:

    To get a detailed breakdown of your COGS, you can use a combination of standard reports and customizations:

    1. General Ledger Reports:

      • Use the "Inventory Posting - Cost to G/L" report to get an overview of how costs are posted to the general ledger.

    2. Inventory Valuation Reports:

      • The "Inventory Valuation" report can provide details about the value of your inventory, including the applied item charges.

    3. Cost Accounting:

      • You can set up cost accounting in Business Central to get a more detailed analysis of your costs. This involves setting up cost types, cost centers, and cost objects.

    4. Custom Reports and Analysis:

      • Create custom reports using Business Central’s reporting tools or Power BI for more granular insight into your COGS.
      • Use the "Item Charge Assignment" entries to analyze the distribution of item charges.

    Example:

    If you want to see the impact of airfreight on your COGS:

    1. Assign airfreight item charges to your purchase orders.
    2. Run the "Item Charge Assignment" report to see how the airfreight costs are distributed.
    3. Use the "Inventory Valuation" report to see the adjusted inventory values including the airfreight costs.

    By properly setting up and using item charges, you can get a much more detailed breakdown of your COGS. This will allow you to see the impact of various additional costs like airfreight and labor on your inventory and COGS accounts.

    Feel free to ask if you need detailed steps on any part of this process or if you need assistance with setting up custom reports.

  • FX-03070658-0 Profile Picture
    FX-03070658-0 6 on at
    Breakdown of COGS
     
    Hi,
     
    This is richard (trough a different account as I can't login with my previous account anymore, entered in a "sign in loop"......).
     
    @ Jun Wang / Valentin: we are using the production order between purchase and sales orders. So all costs are posted to direct costs and COGS accounts when we raise the invoice for produced items. We add additional costs to the purchase receipts through item charges posted via separate purchase invoices for the respective costs. All item charges have their own Product Posting Group. However, all inventory postings result in COGS postings on the product posting group settings of the sold product (in our situation always flowers). Is there a way to achieve this? I tried using dimensions, which work for the purchase part but not for the COGS part. Then dimensions are not carried forward.
     
    Rgrds,
    Richard
  • Suggested answer
    Jun Wang Profile Picture
    Jun Wang 7,443 Super User 2024 Season 2 on at
    Breakdown of COGS
    you need to check if your general posting setup, if business/product posting groups combination was setup using the proper cogs accounts. If all point to the same account, you won't be able to differentiate properly. 
  • Suggested answer
    Valentin Castravet Profile Picture
    Valentin Castravet 24,785 Super User 2024 Season 2 on at
    Breakdown of COGS
    Can you please expand on your inventory/process. Do you simply buy and re-sell items? Or do you use assembly orders for your bouquets? Where is the item charge for labor included, in the sales order?
     

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