Question

Difference Unit Cost - Part cost

F
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Hi,

 

Can someone give me some insights on the difference between unit cost and part cost?

 

  • If I manufacture a standard part, with labour and material, for the first time, it looks like IFS puts the standard cost into the unit cost after receiving (I did not do any calculation up front). This value is ok, do I need to do the part cost calculation? What’s the consequence If I don’t?
  • Configurable parts, with standard cost and cost per config setting, seem to have that cost on the unit cost. If i make a config for the first time, IFS adds the cost in the unit cost. Do I need to do the calculate cost up front in the DOP of interim header?

10 replies

F
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Hi @First Employee ,

Standard Cost & Cost per Part

The inventory value will use a fixed value that is calculated or estimated based on expected costs. For management control purposes, the standards are compared to actual costs, and variances are computed and posted.

For new parts, you could set the standard cost by:

  • Calculating the cost in IFS/Costing. The calculation in costing will then consider direct material, direct labor, direct machine costs and different kind of overhead costs.
  • Enter an estimated material cost on the inventory part record.
  • Let the first receipt of the part set the standard cost. If the part is purchased, the purchase order price will be used as a base for the standard cost. If the part is directly received into stock, the value must be manually defined. If the part is manufactured, it is recommended to perform a calculation in costing before receiving the part.

When a standard cost is settled, it could only be modified by using specific functions. Modifying a standard cost will result in revaluation transactions for the parts in stock. If IFS/Costing is installed, an update of the standard cost must be triggered from there. If IFS/Costing is not installed, the standard cost could be changed by updating the estimated material cost on the inventory part record.

In your case , this cost will be set as standard cost for the part and further receipts will treat this as standard and variances will be triggered if the actual cost of the receipt differs than this standard.

 

Standard Cost & Cost per Configuration:

A fixed standard cost will be used per each unique configuration.

The standard cost for a new configuration could be calculated using an Interim Order, a DOP Order or a Shop Order and then saved as a standard cost for a specific configuration. This standard cost will then be used on following transactions for the specific configuration.

The standard cost for a specific configuration could be modified by using the same function as described above. When the standard cost is calculated and saved, the standard cost will be updated. All parts in stock with that configuration will then be revaluated.

In your case, yes, it is advisable to calculate the cost from DOP header and save it as standard cost for new configurations

Hope this helps!!

Regards,

Mithun K V

F
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Thanks!

 

So, the only difference between part cost and unit cost is that you can calculate in part cost, and select the calculation that suits you and copy it to cost set one?

If you have both part cost and unit cost, and they are different, what does IFS take?

 

Example: If I calculate a cost in a interim header for a configurable part, I do need to it in “cost set one”. But that’s only in interim, not in the standard DOP header?

F
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Userlevel 6
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Hi @First Employee ,

System will use the unit cost. In your example, you can calculate the cost in your interim order and save that cost as standard cost and this will update the unit cost for the specific configuration of the part. You don't have to do part cost calculation and copy that to cost set one.

Hope this is clear

Regards,

Mithun K V

D
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Hi

Part cost is the cost we have in the Part Cost, when we say part Cost , we also need to mention what is the Cost Set.

There can be different Part Costs for the same part, in its different cost sets.

The Cost Template and Cost buckets in those templates basically decides what are the Costs to be included in the Part Cost (Estimated material Cost, Machine runtime Cost etc).

 

Inventory Valuation Method and Part Cost Level of a specific part decide how the Unit Cost for that particular part is established.

 

Inventory Valuation Method = Standard Cost and Part Cost Level = Cost per Part will inherit the Cost in the Cost Set 1 as the Unit Cost of the Part when Copy to Cost Set 1 is performed.

Copying to Cost Set 1 will not set the unit Cost for other parts, their unit cost is set based on the actual Transactions.

Configurable Parts with Inventory Valuation Method = Standard Cost and Part Cost level = Cost per Configuration, we can set the Unit Cost for specific configurations by the “Save Standard Cost “ option enabled in the Interim Demand Header, DOP Header or in the Shop Order etc.

Then the Calculated Estimated Cost (Interim Order Cost, DOP Cost, Shop Order Cost) will be set as the Unit Cost for the specific Configuration.

F
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thanks!

 

For the following situation:

I have a new manufactured part. There is no cost calculation done. I manufacture it for the first time and I want that the actuals determine the cost, not the estimated. I will use that part immediately after I produced it, so there is no time to update routings/structure and cost set 1.

I don’t know how long it will take before i start producing, so I can’t determine the cost properply up front.

 

Can this be achieved?

F
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Userlevel 6
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Hi @First Employee ,

If you manufacture part without the cost rollup, then the first shop order receipt actual cost will be set as the standard cost of the part.

 Regards,

Mithun K V

F
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Userlevel 6
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Hi @First Employee ,

If you manufacture part without the cost rollup, then the first shop order receipt actual cost will be set as the standard cost of the part.

 Regards,

Mithun K V

 

In our case, IFS takes the Estimated Accumulated Cost. That’s the OOREC value. Other go into variances.

 

Is that a setting?

F
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Userlevel 6
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Hi @First Employee ,

Are you entering the estimated material cost in the inventory part cost tab ? if yes, then this cost will be considered as the standard cost and hence when you manufacture the part system is treating your estimate as standard and triggering the variance for the rest of the amount.

So, don't enter any estimated cost for the inventory part if you are not rolling up the cost and want to have the actual cost of first manufacturing to be set as standard cost.

Regards,

Mithun K V

 

F
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Userlevel 6
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Hi,

 

no, all is empty. New created part, only added a routing and a structure.

 

Routing says 2 man hours are needed. I start production, but I report 5 hours on it.

On receipt, IFS will take the cost of the estimated (=2hours), not the actual (=5hours).

F
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Userlevel 6
Badge +17

Hi @First Employee,

Yes, system is considering the shop order estimates as the standard cost during the first production. It is also mentioned in IFS help that system consider the cost set1 value or estimated value

'’The inventory value will use a fixed value that is calculated or estimated based on expected costs. For management control purposes, the standards are compared to actual costs, and variances are computed and posted.'’

Regards,

Mithun K V

 

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