Item Costing#

Overview#

Fully integrated into Microsoft Dynamics 365 Business Central, the Item Costing app provides you with:

• Consistent, highly precise, and reliable data to inform your decision-making processes in manufacturing and sales.
• Fully customizable cost schedules and automated workflows to streamline your business operations and minimize errors.
• Different valuation scenarios based on unit, direct unit, and last unit costs.
• Options for specifying custom surcharges, overheads, and lot sizes, adding list prices to the item master, and comparing calculation results.
• A history of every calculation ever performed and a powerful log function to correct calculation errors immediately.

You can create both setup and demo data with the app and use the calculations that you perform during standard posting processes, for example, to recognize the costs of material consumption by your production department or a subcontractor on your company’s balance sheet. You can also specify context-dependent overhead rates, if needed.

Setup#

Costing & Valuation Setup#

To set up the costing functionality:

1. Choose the Search icon, enter Costing & Valuation Setup, and then choose the related link.
2. Fill in the fields as described in the following table.

General#

Unless you select the Standard costing method, the unit cost represents the average cost of an item across all available inventory.

The last unit cost, on the other hand, isn’t an average value but refers to the item’s most recent cost. The field is updated when you post documents that include the item. For more information about the costs that can be entered on item cards, see About unit cost calculation - Business Central | Microsoft Learn.

Assuming you replenish items that are consumed for make-to-stock or assemble-to-stock in regular intervals, we recommend the use of the unit or the last unit cost for cost calculations. Typically, either comes close to the actual cost posted later.

Although the cost of items that you need to buy only for a specific order can also be calculated in this way, using current purchase prices as a basis for calculation might be advisable, especially if the items are rarely ordered.

Numbering#

Assembly#

Create Demo Data – ribbon function#

Creates sample costing data from the records in the CRONUS demonstration company.

The function not only fills in base data and sets up process workflows for items ICO-0001 to ICO-0008 (which can then be used for costing and on production orders, for example) but also specifies the following:

• No. Series
• Rounding Methods
• Costing & Valuation Setup
• Chart of Cost Elements
• Cost Conditions
• Cost Schedules
• Extended Item Overhead Conditions
  (with the Cost Condition No. field filled in for all items)
• Extended Capacity Overhead Conditions
  (with the Cost Condition No. field filled in for all routing lines)
• Item Charge Conditions

When you run the Create Setup Data action under the same menu item, only the data included in the bulleted list is created.

Chart of cost elements#

The chart of cost elements is the basis for cost calculations and similar in form and function to the chart of accounts in the Finance area. It is used to save, standardize, and group cost elements for comparison.

To set up the chart:

1. Choose the Search icon, enter Chart of Cost Elements, and then choose the related link.
2. Fill in the fields as described in the following table.

Ribbon functions#

Indent Element Chart#

Sets a filter for elements of type End-Total in the Totaling field.

Comments#

Used to store comments about a cost element. You can also specify a date for each comment.

Cost conditions#

The result of each cost calculation is assigned to a cost element based on certain conditions.

1. Choose the Search icon, enter Cost Conditions, and then choose the related link.
2. On the ribbon, choose New and then select one of the options for creating a condition – Material, Production, Capacity, or Item Charge.
3. Fill in the fields as described in the following subsections.

When you’ve specified the general settings for a type of direct and overhead costs on the condition header, you can use one or more condition lines to set up exactly how you want costs to be calculated.

After you’ve set up the condition, it will be shown on the Cost Conditions page with the selected cost group specified in the Type field. You can then run one of the following functions to assign the condition to a master record (such as an item or a work center) based on that group.

Conditions entered on the lines have a higher priority than those specified by the Ext. Item Overhead Conditions and Ext. Cap. Overhead Conditions functions. This is true for direct costs (entered in the Direct Unit Cost field) and indirect costs (entered in the Indirect Cost % or Overhead Rate field) specified for a master table.

Cost Condition – Material#

On this page, which opens when you run the Create Condition – Material action from the Cost Condition ribbon, you can specify conditions of type Material.

Afterward, you can run the Ext. Item Overhead Conditions action on the page to link each condition to an item so that it can be used to calculate the cost of (purchased) raw materials.

General#

Lines#

Cost Condition – Production#

On this page, which opens when you run the Create Condition – Production action from the Cost Condition ribbon, you can specify conditions of type Manufacturing.

Afterward, you can run the Ext. Item Overhead Conditions action on the page to link each condition to an item so that it can be used to calculate the cost of finished (that is, processed) goods.

General#

Lines#

Cost Condition – Capacity#

On this page, which opens when you run the Create Condition – Capacity action from the Cost Condition ribbon, you can specify conditions of type Capacity.

Afterward, you can run the Ext. Cap. Overhead Conditions action on the page to link each condition to a work or machine center so that it can be used to calculate the cost of capacities (for example, because of routings stored for processed items).

General#

Lines#

Cost Condition – Item Charge#

On this page, which opens when you run the Create Condition – Item Charge action from the Cost Condition ribbon, you can specify conditions of type Item Charge and then assign each condition to an item so that it can be used to calculate the cost of processed goods.

In other words, you no longer specify an item’s manufacturing cost, but the charges added to arrive at its list price.

General#

Lines#

Cost schedules#

One way to analyze the results of the cost calculations you’ve performed is to set up a cost schedule, which is similar in form and function to the account schedules that are available in the standard app and provides you with freely customizable row and column definitions.

Sometimes, the schedule might look the same as the associated cost element chart; often, however, it contains fewer details because certain data has been aggregated.

For example, you can set a filter on a schedule so that you only see the total cost of materials, without the amount being broken down into direct and indirect costs. This is possible because the system automatically assigns a value to each element of a calculation when you set up a new cost worksheet.

You can create as many schedules as you like.

To set up a schedule:

1. Choose the Search icon, enter Cost Schedule Names, and then choose the related link.
2. On the ribbon, choose New.
3. Fill in the fields as described in the following table.

Afterward, you can use the Edit Schedule action on the ribbon to add calculation details.

Ribbon functions#

Delete#

Deletes the cost schedule.

Print#

Prints the cost schedule based on the specified column definition.

To be able to use this function, you need to enter at least one cost schedule line on the request page.

Insert Elements#

Copies the records on the Cost Element page to the current schedule, with one line set up for each element. The numbers of the elements are displayed in the Totaling column.

On the request page, you can choose from a list what cost elements to copy, and then choose OK to transfer them.

Edit Column Definition#

Specifies a column definition for the schedule. When you open a schedule, you can use the Assist button next to the Name field to select a definition. If none has been set up yet, choose New instead, and then fill in the Name and Description fields.

Afterward, you can fill in the fields on the page as described in the following table.

Extended overhead conditions#

These conditions are used to:

1. Assign cost elements to master records, such as items or work centers.
2. Make it easier to maintain overhead rates.

They have a higher priority than the default overhead fields…

• Indirect Cost %
• Overhead Rate
• Indirect Cost % (Consumption)
• Overhead Rate (Consumption)

…on master records such as items or work centers.

The following types of overhead conditions are available:

• Extended Item Overhead Conditions
• Extended Capacity Overhead Conditions

Item overhead conditions#

These conditions can be assigned per item or item group.

To open the Ext. Item Overhead Conditions page, use the general search function or the relevant ribbon action (found under the same name on item cards).

The General FastTab shows the filters available for customizing the page view. All are initially set to include only the item record that you opened the page from.

The cost conditions themselves are set up on the Lines FastTab.

To delete a line, choose Delete on the ribbon.

Capacity overhead conditions#

These conditions can be assigned to capacities and are included in cost calculations performed for a machine or work center (for example, because a routing is stored with a manufacturing item).

To open the Ext. Cap. Overhead Conditions page, use the general search function or the relevant ribbon action (found under the same name on work and machine center cards).

The General FastTab shows the filters available for customizing the page view. All are initially set to include, for example, only the work center that you opened the page from.

The cost conditions themselves are set up on the Lines FastTab.

To delete a line, choose Delete on the ribbon.

Item Charge Conditions#

On this page, you can assign a charge calculation to an item (see Cost Condition – Item Charge) to determine costs that aren’t recognized on the balance sheet (=that aren’t part of the item’s unit cost).

You can also enter other direct costs on the lines of the page, which can be opened from item cards.

The General FastTab shows the filters available for customizing the page view. All are initially set to include only the item that you opened the page from.

The cost conditions themselves are set up on the Lines FastTab.

To delete a line, choose Delete on the ribbon.

Costing Defaults#

You can run this function from an item cost worksheet to set up (and edit) a variety of lot sizes for cost calculations. The values that are used by this action can already be specified on the relevant item card (by running the function with the same name there).

Item cost worksheets#

This worksheet is used to determine the cost of manufacturing certain goods. It can be opened from the ribbon of an item card.

Worksheet lines#

On the worksheet lines, you can see (if available) the calculations that have already been performed for the item.

Ribbon functions#

Calculate#

Calculates the costs of the selected items.

Change Status#

Sets the status of the worksheet line to Preferred or Rejected.

The status is used for the Adopt Preferred Entries action, as the function copies only lines in the Preferred status. Cost values that have been copied are set to Implemented automatically.

Get Error Log#

Lists all errors that occurred during calculation. You can work on the errors by using the lookups next to the relevant fields or by running the Show action on the ribbon.

Adopt Preferred Entries#

Copies the worksheet lines in the Preferred status to the relevant item card. You can also use this function to revalue item ledger entries that have not been posted yet.

Costing Defaults#

Simulates the costs of manufacturing items in different lot sizes.

Typically, these costs have already been entered as costing defaults on the relevant item card. If necessary, you can change them here or set up new entries.

For more information, see Item Costing Defaults.

Cost Values (Overview)#

Creates a cost schedule based on the specified column and row definitions, showing you the costs calculated on the worksheet according to the filters you set. You can also choose a second column definition here if you want to compare one worksheet to another.

Cost Values (BOM)#

Shows all calculation values broken down by cost group.

You can open the source documents associated with each line by running a ribbon function.

Explosion of BOM#

Lists all levels and costs calculated for a worksheet in aggregated form.

Compare BOM Explosion#

With this function, you can compare two item cost worksheets. The comparison is visualized so that you can easily identify the differences to the previous worksheet.