# 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.