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 direct 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 direct 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 including the item. For more information about the types of costs 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 direct cost in cost calculation. 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 item is rarely ordered.

In other words, the unit cost includes item charges, such as freight and precious metal fees, and discounts. The direct unit cost, on the other hand, is what you would pay for purchasing the item prior to taking charges and discounts into account.

Numbering#

Assembly#

Create Setup Data – ribbon function#

Running this action creates sample costing data by using the records in the CRONUS demonstration company.

Base data and process workflows for items ICO-0001 to ICO-0008 (which can then be used for costing and production orders, for example) are set up during this process, as well as the following records:

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

When you run the Create Setup Data action under the same menu item, only the data included on the bullet list will be 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. The page also shows when certain comments were added or changed.

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#