Item Cost Calculation

Module Guide: Item Cost Calculation

Module Location

PPIC > Item Cost Calculation

Module Objective

The Item Cost Calculation module is a cost accounting tool used to calculate or "assemble" the total cost of an item. This module allows the user to calculate a product's standard cost by combining several cost components, such as the cost of materials used (Items/Services Used), standard costs (e.g., labor), and additional costs (e.g., transportation).

1. Main View (Calculation List)

The main page of this module displays a list of all cost calculation documents that have been previously created.

View Explanation

• View: This page is a history of cost calculation documents. You can see the Code and Item/Service Name whose cost has been calculated.

• Action Buttons:

  • [New]: The primary button to start a new cost calculation.

2. Steps to Perform a Cost Calculation

Step 1: Create a New Document

From the Main View, click the [New] button to open the Add Calculation form.

Step 2: Define the Target Item

On the form that appears, in the Item/Service Name column, select the item whose cost you are going to calculate. This is the "resulting" product of the calculation.

Step 3: Detail the Cost Components

At the bottom of the form, add all the cost components that make up the target item:

1. Items/Services Used: In this table, add all materials or components used to make the target item, along with their Qty (quantity).

2. Standard Costs: Select and add relevant standard costs, such as COGM_DIRECTLABOUR (Direct Labor Cost).

3. Additional Costs: Add other costs that need to be allocated, such as Transportation Cost.

Step 4: Save the Calculation

After all cost components have been entered, click the [Save] button. The system will sum up all these costs to generate the final total cost (standard cost) of the target item.

Tips & Important Notes

• This module is crucial for establishing the standard cost for purchased items (to calculate landed cost) or for internally produced sub-assemblies.

• The standard cost generated here will become the basis for inventory valuation and the Cost of Goods Sold (COGS) calculation.

• This is a very important module for the Cost Accounting team.