Cost Calculation—Exercises

Basic Data Setup

Purchased and Manufactured Inventory Parts

Purpose: The purpose of this exercise is to enter two purchased and two manufactured parts used in the main exercises.

Windows:
Inventory Part

1. Enter inventory parts as described in the table below.

   Part No.	Description	Part Type	Estimated Material Cost
   XX-98-100	Wheel	Manufactured	--
   XX-98-200	Aluminum Rim	Manufactured	--
   XX-98-300	Aluminum	Purchased	300
   XX-98-400	Tire	Purchased	150

General exercise for Purchased Inventory Part
General exercise for Manufactured Inventory Part
General exercise for Define Material Costs

Supplier for Purchase Part

Purpose: The purpose of this exercise is to enter supplier for the purchased parts created above.

Windows:
Supplier for Purchase Part

1. Open the Supplier for Purchase Part window.
2. Query for the purchase part that you created.
3. Connect a supplier for the purchase parts.

General exercise for Supplier for Purchase Part

Cost Elements and Cost Buckets

Purpose: The purpose of this exercise is to create cost elements and buckets for material, delivery, general and sales overheads used in the main exercise.

Windows:
Cost Elements
Cost Bucket
Overhead Cost Assistant

1. Your company, IFS Racing, works with a material overhead of 5% based on the estimated material cost. Register a new cost element with source element 110 (Estimated Material Cost), element factor 5, and overhead type Material Overhead.
2. IFS Racing uses a fixed delivery overhead of 10 per unit. Register a new cost element with fixed cost 10, OH cost relation unit, and overhead type Delivery Overhead.
3. IFS Racing also uses part-specific sales overheads for packing material. Register a new cost element with source element 601 (Sales OH Trigger), and overhead type Sales Overhead.
4. The actual rate for the sales overhead is defined per part. Open the Part Cost window, query for your parts and cost set 2 and register the part-specific sales overhead. Use the cost element created in the previous step and enter the cost 15 per unit for your purchased parts and 25 per unit for your manufactured parts.
5. IFS Racing also uses part-specific material overhead for part XX-98-400 Tire. Register a new cost element with source element 501 (Material OH Trigger), and overhead type Material Overhead.
6. The rate for the part-specific material overhead is defined per part. Open the Part Cost window, query for part XX-98-400 and cost set 2 and register the part-specific material overhead. Use the cost element created in the previous step and enter the cost 15 per unit.
7. IFS Racing also uses part-specific general overhead for part XX-98-100 Wheel. Register a new cost element with source element 502 (General OH Trigger, and overhead type General Overhead.
8. The rate for the part-specific general overhead is defined per part. Open the Part Cost window, query for part XX-98-100 and cost set 2 and register the part-specific general overhead. Use the cost element created in the previous step and enter the cost 15 per unit.
9. IFS Racing also uses multiple delivery overheads for part XX-98-400 Tire. Register a new cost element with source element 141 (Purchase Delivery OH Trigger), and overhead type Delivery Overhead.
10. The rates for the multiple delivery overheads are defined per supplier for purchase part, per purchase part and per supplier. Open the Multiple Delivery Overhead Setup window and query for the cost element created in previous step.
11. To register supplier for purchase part delivery overhead, click the Multiple Delivery Overhead Setup/ Supplier for Purchase Part tab, register the supplier for purchase part delivery overhead for  part XX-98-400 and cost set 2. Enter the cost 15 per unit. Make sure to select the Add Delivery OH to Purchase Part check box.
12. To register purchase part delivery overhead, click the Multiple Delivery Overhead Setup/ Purchase Part tab, register the purchase part delivery overhead for part XX-98-400 and cost set 2. Enter the cost 15 per unit. Make sure to select the Add Delivery OH to Supplier check box.
13. To register supplier delivery overhead, click the Multiple Delivery Overhead Setup/ Supplier tab, register the supplier delivery overhead for supplier connected to the part and cost set 2. Enter the cost 15 per unit.
14. Create separate cost buckets for the six cost elements and connect the cost elements to the buckets.
15. We also want a sum of the material related costs in our calculation. Define a bucket with bucket type Bucket of Buckets.
16. Connect Bucket 110 (Estimated Material Cost), the material overhead buckets, and the delivery overhead buckets to the summary bucket.

Note: Most of the steps above could also be done using the Overhead Cost Assistant.

General exercise for Set Up Cost Elements
General exercise for Set Up Cost Buckets
General exercise for Define Sales Overhead Costs
General exercise for Define Part Specific Material Overhead Costs
General exercise for Define Part Specific General Overhead Costs
General exercise for Define Multiple Delivery Overhead Costs

Create Cost Templates and Assign Cost Templates to the Parts

Purpose: The purpose of this exercise is to create/modify two system-generated cost templates and assign them to the purchased and manufactured part used in the main exercise.

Windows:
Cost Template
Part Cost

1. Add the buckets for material, delivery and sales overhead to the existing cost template P-110 (bucket 110 should already be included)
2. Add the buckets for sales overhead and the material sum bucket (bucket of buckets) to the existing cost template M-110.
3. Connect cost template P-110 to cost set 2 for your purchased parts and cost template M-110 to cost set 2 for your manufactured parts.

General exercise for Set Up Cost Template
General exercise for Assign Template to Inventory Parts

Work Center and Labor Class

Purpose: The purpose of this exercise is to enter the work center and labor class used in the main exercises.

Windows:
Work Center
Manufacturing Labor Class

1. Create an internal work center with the ID XXNC (replacing XX with your initials) and the description NC-Machine.
2. Enter the work center cost 150 per hour and the overhead 1 cost 30 per hour in cost set 2.
3. Create a labor class with the ID XXW (replacing XX with your initials) and the description Department Wheel.
4. Enter the labor class rate 160 per hour and the overhead cost 30 per hour in cost set 2.

General exercise for Work Center
General exercise for Define Machine Costs
General exercise for Labor Class
General exercise for Define Labor Costs

Required Data

Create Product Structure and Routing

Purpose: The purpose of this exercise is to enter the product structures and routings for your manufactured parts.

Windows:
Product Structure
Routing

1. Open the Product Structure window, query for your manufactured parts and enter the structures for your manufactured parts.
   Part XX-98-100 Wheel consists of 1 unit of XX-98-200 Aluminum Rim and 1 unit of XX-98-400 Tire.
   Part XX-98-200 Aluminum Rim consists of 1 unit of XX-98-300 Aluminum.
   Change status to Buildable for both structures.
2. Open the Routing window, query for your manufactured parts and enter the routing operations for your manufactured parts.
   Enter the following operations for the part XX-98-100 Wheel:

   Operation No.	Description	Work Center	Mach Setup	Mach Run Factor	Factor Unit	Labor Class	Labor Setup	Labor Run Factor	Factor Unit	Crew Size
   10	Prepare Assembly	XXNC	0.2	0.5	Hours/Unit	XXW	0.2	0.1	Hours/Unit	1
   20	Assembly	XXNC	0	0	Hours/Unit	XXW	0	1	Hours/Unit	1

Enter the following operations for the part XX-98-200 Aluminum Rim:

Operation No.	Description	Work Center	Mach Setup	Mach Run Factor	Factor Unit	Labor Class	Labor Setup	Labor Run Factor	Factor Unit	Crew Size
10	Machining	XXNC	0.1	0.2	Hours/Unit	XXW	0.2	0.1	Hours/Unit	1

Change status to Buildable for both routings.

General exercise for Creating Product Structure
General exercise for Creating Routing

Main Exercises

Purpose: The purpose of this exercise is to calculate costs for a purchased and a manufactured part and to understand from where the costs come from.

Windows:
One Level Part Cost Calculation
All Levels Part Cost Calculation
Part Cost
Inventory Part

Calculate Costs for Purchased Part

1. Open the One Level Part Cost Calculation dialog box and calculate costs for purchased part XX-98-400 Tire in cost set 2.
2. Open the Part Cost window and query for the purchased part in cost set 2.
3. Analyze the results of your cost calculation. It is important to understand where the costs come from.

Note 1: To see the buckets for the sales overhead costs, Include Sales OH check box under the Cost Build-up Level area must be selected.
Note 2: To have the estimated material costs for the cost calculation, it is important to enter the estimated material cost in Cost Set Estimated Material Cost field in Part Cost/ Part Cost Details window. However  the estimated material costs of corresponding inventory parts will be copied in to cost set estimated material cost and cost calculation will proceed with those copied values, if the Copy Estimated Material Cost from Inventory Part check box in Cost Calculation dialog box is selected.

Calculate Costs for Manufactured Part

1. Open the One Level Part Cost Calculation dialog box and calculate costs for manufactured part XX-98-100 Wheel in cost set 2.
2. Open the Part Cost window and query for your manufactured part in cost set 2.
3. Analyze the results of your cost calculation. It is important to understand where the costs come from.
4. Open the All Levels Part Cost Calculation dialog box and calculate costs for manufactured part XX-98-100 Wheel in cost set 2.
5. Open the Part Cost window and query for your manufactured part in cost set 2.
6. Analyze the results of your cost calculation. It is important to understand where the costs come from.

Note 1: When calculating the costs for one level, no cost calculation has been made for some of your components, so the cost structure will be incomplete.
Note 2: The sales overhead costs are not included in the roll up of costs, so the manufactured part should not inherit sales overhead costs from its component.
Note 3: To have the estimated material costs for the cost calculation, it is important to enter the estimated material cost in Cost Set Estimated Material Cost field for the Part Cost/ Part Cost Details tab. However the estimated material costs of corresponding inventory parts will be copied to cost set estimated material cost and cost calculation will proceed with those copied values, if the Copy Estimated Material Cost from Inventory Part check box in the Cost Calculation dialog box is selected.

Calculate Costs for Selected Parts

1. Open the Part Costs window and query for parts XX-98-100 Wheel and XX-98-400 Tire in cost set 2.
2. Select the records, right-click, point to Cost Calculations and then click Calculate Part Cost - Selected Parts.
3. On the dialog box that appears, select One Level.
4. On the Stop Cost Roll list, select Stop Cost Rollup.
5. Enter a date in the Effective Date field. The structure and routings valid for this date will be used for the calculation.
6. Select the Copy Estimated Material Cost from Inventory Part check box to copy the estimated material cost to the Cost Set Estimated Material Cost field.
7. Select the Run in Background check box to run the calculation as a background job.
8. Click OK.

Calculate Cost for Selected Structure and Routing

1. Open the Cost Build-Up per Structure/Routing window and create a new record.
2. In the Site field, click List and select site 1.
3. In the Part No field, click List and select part 21-240.
4. In the Cost Set field, click List and select cost set 2.
5. In the Struct Rev field, click List and select the prototype structure revision and alternative for which you wish to perform the cost calculation.
6. In the Rout Rev field click List and select the prototype routing revision and alternative for which you wish to perform the cost calculation.
7. Save the record.
8. Click Calculate.