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<ManualTopic ID="/baanerp/ti/onlinemanual/000184" xml:lang="en">
	<Header>
		<Title xmlns:ssa="http://www.ssaglobal.com" xmlns:HTML="http://www.w3.org/TR/REC-html40">Calculation of cost/valuation prices for standard/customized/STO items</Title>
		<Keyword><Level1>Cost price calculation</Level1>
		</Keyword>
		<Keyword><Level1>Standard cost price calculation</Level1>
		</Keyword>
		<Keyword><Level1>Valuation price calculation</Level1>
		</Keyword>
	</Header>
	<GeneralSection><Paragraph>An item's standard cost price is a calculated price that provides an estimation of the item's value. The standard cost price of a manufactured item consists of material costs, operation costs, and end-item surcharges. For more information, refer to <Link href="/baanerp/ti/onlinemanual/000023" role="manual">Standard cost price</Link>.</Paragraph>
		<Paragraph>Use the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000" role="session">Calculate Cost and Valuation Prices (ticpr2210m000)</GUIRef> session to calculate standard cost prices and valuation prices. Depending on the value of the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000#calc.meth" role="formfield">Cost Price Calculation Method</GUIRef> field, SSA ERP determines how the product structure is analyzed during cost price calculation. For more information, refer to <Link href="/baanerp/ti/onlinemanual/000026" role="manual">Cost price calculation methods</Link>.</Paragraph>
		<Paragraph>A price calculation code stores the price calculation data that is used to calculate the cost price. The standard price calculation code specified in the <GUIRef href="/baanerp/ti/cpr/ticpr0100m000" role="session">Cost Price Calculation Parameters (ticpr0100m000)</GUIRef> session stores data to calculate the standard cost price. Other price calculation codes store the data for simulation purposes. For more information, refer to <Link href="/baanerp/ti/onlinemanual/000030" role="manual">Price calculation code</Link>.</Paragraph>
		<List><ListIntro>The topic below describes a single-level cost price calculation by ERP for items of the following types:</ListIntro>
			<ListItem><Link href="/baanerp/ti/glossary/glossary#StandaItem.ti" role="glossary">Standard items</Link>.</ListItem>
			<ListItem><Link href="/baanerp/ti/glossary/glossary#CustomItem.ti" role="glossary">Customized items</Link>.</ListItem>
			<ListItem><Link href="/baanerp/ti/glossary/glossary#000026" role="glossary">Standard-to-order</Link> (STO) items.</ListItem>
		</List>
		<Paragraph>The costs of a routing's last operation are calculated first. After that, the previous operations are calculated, one by one. For a schematic overview refer to <Link href="/baanerp/ti/onlinemanual/000347" role="manual">Cost price calculation flow chart</Link>.</Paragraph>
		<GeneralSection><SectionTitle></SectionTitle>
			<Paragraph></Paragraph>
		</GeneralSection>
		<ProcedureSection><SectionTitle>STEPS IN THE COST PRICE CALCULATION PROCESS</SectionTitle>
			<Steps><Step><StepTitle>Determine the routing for the item</StepTitle>
					<Paragraph>To calculate the standard cost price of an item, first the appropriate routing for the item must be determined. SSA ERP must know the routing to determine the set of operations that is used to produce the item. In addition, the best order quantity in which the item is produced must be established.</Paragraph>
					<Paragraph>If the <GUIRef href="/baanerp/ti/ipd/tiipd0101m000#tiipd001.oqdr" role="formfield">Order Qty-dependent Routing</GUIRef> check box in the <GUIRef href="/baanerp/ti/ipd/tiipd0101m000" role="session">Items - Production (tiipd0101m000)</GUIRef> session is selected, the routing depends on the number of items that is going to be produced. Because the production order quantity is not established yet, when you calculate the standard cost price, the selection of the routing is based on the number in the <GUIRef href="/baanerp/tc/ibd/tcibd2100s000#tcibd200.fioq" role="formfield">Fixed Order Quantity</GUIRef> field, or the <GUIRef href="/baanerp/tc/ibd/tcibd2100s000#tcibd200.ecoq" role="formfield">Economic Order Quantity</GUIRef> field in the <GUIRef href="/baanerp/tc/ibd/tcibd2500m000" role="session">Items - Ordering (tcibd2500m000)</GUIRef> session. If the <GUIRef href="/baanerp/ti/ipd/tiipd0101m000#tiipd001.oqdr" role="formfield">Order Qty-dependent Routing</GUIRef> check box is not selected, the default routing is taken. For more information, refer to <Link href="/baanerp/ti/onlinemanual/000045" role="manual">Selection of routing to calculate costs</Link>.</Paragraph>
					<Paragraph>For customized items, SSA ERP determines the number of end items by totalizing the end items for all project parts (see the <GUIRef href="/baanerp/ti/pcs/tipcs2111m000" role="session">Project Parts (tipcs2111m000)</GUIRef> session). For the rest, the same procedure is followed as for standard items, except that a customized item can only have one quantity-dependent routing.</Paragraph>
				</Step>
				<Step><StepTitle>Calculate net output and gross output for the operations</StepTitle>
					<Paragraph>For every operation, the net output and the gross output is calculated. The net output and the gross output are used to calculate material costs and operation costs for an operation.</Paragraph>
					<Paragraph>For the last operation, the output is end-items. For the previous operations the output is intermediate products. The scrap and yield on the operations are taken into account to calculate the gross output for each operation.</Paragraph>
					<Paragraph>Standard cost price calculation starts with determining the output of the last operation. For the last operation, the net output equals the order quantity as determined in Step 1. You can calculate the gross output of the last operation based on the net output using the operation's scrap and yield:</Paragraph>
					<Paragraph><Code>Gross output = [net output x 100 / yield % on operation] + scrap quantity on operation</Code>
					</Paragraph>
					<Paragraph>The gross output of the last operation equals the net output of the preceding operation. Using the scrap and yield of the preceding operation, you can calculate the gross output of that operation. In the same way, the gross outputs and net outputs of the other preceding operations are calculated, one after another.</Paragraph>
					<Paragraph>All quantities and amounts are recalculated to one end item by dividing the quantities and amounts by the number of end items as determined in Step 1.</Paragraph>
				</Step>
				<Step><StepTitle>Calculate operation costs</StepTitle>
					<Paragraph>SSA ERP must determine the man hours and the machine hours spent on an operation. The way that man hours and machine hours are calculated by SSA ERP depends on whether an operation has a fixed duration or not. For more information, refer to <Link href="/baanerp/ti/onlinemanual/000159" role="manual">Calculating man/machine hours</Link>.</Paragraph>
					<Paragraph>To calculate operation costs, the calculated hours for an operation are multiplied by the operation rates. Operation rates are defined in the <GUIRef href="/baanerp/ti/cpr/ticpr1150m000" role="session">Operation Rates (ticpr1150m000)</GUIRef> session, and can exist for labor, machines, overhead on labor, and overhead on machines. The operation rates are linked to an operation rate code (defined in the <GUIRef href="/baanerp/ti/cpr/ticpr0150m000" role="session">Operation Rate Codes (ticpr0150m000)</GUIRef> session).</Paragraph>
					<Paragraph>The operation rate code is linked to a work center in the <GUIRef href="/baanerp/ti/rou/tirou0101m000" role="session">Work Centers (tirou0101m000)</GUIRef> session, and/or to a work center/task relationship in the <GUIRef href="/baanerp/ti/rou/tirou0104m000" role="session">Task Relationships (tirou0104m000)</GUIRef> session. Whether the operation rates linked to the work center, or to the work center/task relationship are used for cost price calculation, depends on the setting of the <GUIRef href="/baanerp/ti/cpr/ticpr0100m000#ticpr000.kort" role="formfield">Type of Operation Rates</GUIRef> field in the <GUIRef href="/baanerp/ti/cpr/ticpr0100m000" role="session">Cost Price Calculation Parameters (ticpr0100m000)</GUIRef> session.</Paragraph>
					<Paragraph>If the parameter says that the operation rates of the work center are used for cost price calculation, SSA ERP must determine the work center type of the work center on the operation. If the work center is a main work center or a sub work center, SSA ERP looks for the operation rates, and uses them to calculate the operation costs. If the work center is a subcontracting work center, SSA ERP determines the subcontracting method, and calculates the subcontracting costs as explained in <Link href="/baanerp/ti/onlinemanual/000084" role="manual">Calculating subcontracting costs</Link>.</Paragraph>
					<Paragraph>All quantities and amounts are recalculated to one end item by dividing the quantities and amounts by the number of end items as determined in Step 1.</Paragraph>
				</Step>
				<Step><StepTitle>Calculate material costs for the operation</StepTitle>
					<Paragraph>To calculate the material costs for an operation, SSA ERP needs to know the material input. Material input is referred to as net input if the scrap is not taken into account. Net input is calculated as follows:</Paragraph>
					<Paragraph><Code>Material net input = gross output items preceding operation x net quantity in BOM</Code>
					</Paragraph>
					<Paragraph>Note that the gross output of end items for the last operation equals the order quantity as determined in step 1.</Paragraph>
					<Paragraph>However, SSA ERP needs to know the gross input of materials for every operation. The gross input is based on the net input, but takes the BOM line's scrap into account:</Paragraph>
					<Paragraph><Code>Gross input = [(scrap% of BOM line/100 + 1) x net input] + scrap qty of BOM line</Code>
					</Paragraph>
					<Paragraph>Note that input is related to component materials. Output is related to semi-finished products and end products, and is calculated as described in Step 2.</Paragraph>
					<Paragraph>To calculate material costs for an operation, SSA ERP multiplies an operation's gross input of materials by the prices of the materials concerned. If the material is a purchased item, the purchase price is taken. If the material is an (manufactured) item that consists of materials itself, the item's standard cost price is taken. The standard cost price of materials is calculated dependent on the multilevel calculation method that was selected in the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000" role="session">Calculate Cost and Valuation Prices (ticpr2210m000)</GUIRef> session. For more information, refer to <Link href="/baanerp/ti/onlinemanual/000026" role="manual">Cost price calculation methods</Link>.</Paragraph>
					<Paragraph>The standard cost price of the material includes the surcharges for the material's item warehouse. However, the item warehouse surcharge is not aggregated to the cost price of the main item. Instead, the surcharges for the BOM warehouse are aggregated to the cost price of the main item.</Paragraph>
					<Paragraph>An item's purchase price is determined based on the purchase price priority, which is defined in the <GUIRef href="/baanerp/ti/cpr/ticpr1100m000" role="session">Price Calculation Codes (ticpr1100m000)</GUIRef> session. The purchase price can be the simulated purchase price, the current purchase price, the average purchase price, or the latest purchase price.</Paragraph>
					<Paragraph>In cost price calculation, SSA ERP handles phantoms as normal items.</Paragraph>
					<Paragraph>All quantities and amounts are recalculated to one end item by dividing the quantities and amounts by the number of end items as determined in Step 1.</Paragraph>
				</Step>
				<Step><StepTitle>Search for previous operation</StepTitle>
					<Paragraph>In the preceding steps of this cost price calculation procedure, the costs for the last operation of the routing is calculated. If another, previous operation is found, the cost price calculation process is repeated as from Step 3. If a previous operation is not found, the process continues with Step 6.</Paragraph>
					<Paragraph>In (standard) cost price calculation, SSA ERP ignores the network routing that is established by using phantoms. SSA ERP includes the costs for the routing of the phantom in the material costs of the phantom item.</Paragraph>
				</Step>
				<Step><StepTitle>Calculate material costs for unlinked materials</StepTitle>
					<Paragraph>If no operations exist for an item, no operation costs are present. Consequently, the previous steps do not apply. Because material is required to produce the item, SSA ERP calculates in this step the costs of these so-called unlinked materials. The calculation for unlinked material costs equals the calculation as described in Step 4.</Paragraph>
					<Paragraph>Note that if operations are available, but (some of) the materials have 0 (zero) as a value in the <GUIRef href="/baanerp/ti/bom/tibom1110m000#tibom010.opno" role="formfield">Operation</GUIRef> field, in the <GUIRef href="/baanerp/ti/bom/tibom1110m000" role="session">Bill of Material (tibom1110m000)</GUIRef> details session, or the <GUIRef href="/baanerp/ti/bom/tibom0140m000" role="session">BOM Line - Material-Routing Relationships (tibom0140m000)</GUIRef> session, SSA ERP assumes that those materials are required in the first operation of the routing.</Paragraph>
				</Step>
				<Step><StepTitle>Calculate surcharges</StepTitle>
					<Paragraph>The last step in the cost price calculation procedure is to calculate the surcharges. Several types of surcharges are distinguished when calculating the standard cost price, for example, surcharges for items, for item groups, for item/warehouse combinations, and for general warehouses. In addition, you can distinguish between surcharges that are effective during the item's receipt in the warehouse, or during issue of the warehouse. Surcharges are defined in the <GUIRef href="/baanerp/ti/cpr/ticpr1110m000" role="session">Item Surcharges (ticpr1110m000)</GUIRef> session. Surcharges are calculated in a specific sequence. This sequence is important because surcharges can be calculated over other surcharges. For standard cost price calculation, surcharges are calculated in the following order:</Paragraph>
					<List><ListItem>Item receipt surcharges.</ListItem>
						<ListItem>Item group receipt surcharges.</ListItem>
						<ListItem>Item/warehouse receipt surcharges.</ListItem>
						<ListItem>Item group/warehouse receipt surcharges.</ListItem>
						<ListItem>General warehouse receipt surcharges.</ListItem>
						<ListItem>Item issue surcharges.</ListItem>
						<ListItem>Item group issue surcharges.</ListItem>
						<ListItem>Item/warehouse issue surcharges.</ListItem>
						<ListItem>Item group/warehouse issue surcharges.</ListItem>
						<ListItem>General warehouse issue surcharges.</ListItem>
					</List>
					<List><ListIntro>Note the following:</ListIntro>
						<ListItem>The general warehouse is the warehouse that you define for the item in the <GUIRef href="/baanerp/tc/ibd/tcibd2500m000" role="session">Items - Ordering (tcibd2500m000)</GUIRef> session. You can define surcharges for the general warehouse in the <GUIRef href="/baanerp/ti/cpr/ticpr1110m000" role="session">Item Surcharges (ticpr1110m000)</GUIRef> session. To do this, you leave the <GUIRef href="/baanerp/ti/cpr/ticpr1110m000#ticpr110.item" role="formfield">Item</GUIRef> field and the <GUIRef href="/baanerp/ti/cpr/ticpr1110m000#ticpr110.citg" role="formfield">Item Group</GUIRef> field empty, and you select the general warehouse to define the surcharge for.</ListItem>
						<ListItem>The item/warehouse surcharges are only taken into account for cost price calculation, if the warehouse equals the general warehouse defined in the <GUIRef href="/baanerp/tc/ibd/tcibd2500m000" role="session">Items - Ordering (tcibd2500m000)</GUIRef> session.</ListItem>
					</List>
					<Paragraph>For standard cost price calculation, item and warehouse surcharges are included regardless of their realization moment (receipt or issue). If multiple surcharges of the same type are defined, they are handled by their sequence number, lowest number first.</Paragraph>
				</Step>
				<Step><StepTitle>Aggregated or detailed cost price</StepTitle>
					<Paragraph>In SSA ERP, you can determine how to break down the cost price: from aggregated on the cost components defined in the <GUIRef href="/baanerp/ti/cpr/ticpr0107m000" role="session">Items - Costing (ticpr0107m000)</GUIRef> session, until detailed in a greater or lesser degree. If you want to break down your cost price in a detailed way, you must enter a chart with an associated detailed cost component structure in the <GUIRef href="/baanerp/ti/cpr/ticpr0107m000" role="session">Items - Costing (ticpr0107m000)</GUIRef> session. For more information, refer to <Link href="/baanerp/ti/onlinemanual/000080" role="manual">Cost components</Link>.</Paragraph>
				</Step>
			</Steps>
		</ProcedureSection>
		<GeneralSection><SectionTitle>THE ACTUALIZING PROCESS</SectionTitle>
			<Paragraph>You can make the calculated standard cost price and the valuation price actual as follows:</Paragraph>
			<List><ListItem>For standard items in the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000" role="session">Calculate Cost and Valuation Prices (ticpr2210m000)</GUIRef> session and the <GUIRef href="/baanerp/ti/cpr/ticpr2220m000" role="session">Actualize Standard Cost and Valuation Prices (ticpr2220m000)</GUIRef> session.</ListItem>
				<ListItem>For customized items in the <GUIRef href="/baanerp/ti/pcs/tipcs3250m000" role="session">Calculate Cost Prices by Project (tipcs3250m000)</GUIRef> session.</ListItem>
			</List>
			<Paragraph>During the actualization process, the cost component structure (consisting of the aggregated and detailed cost components), the cost price, and the valuation price are made effective. In other words, the structure and prices are stored for an item for a certain date. After the actualization, the effective cost component structure can be viewed, for example, in the <GUIRef href="/baanerp/ti/cpr/ticpr3161m000" role="session">Effective Cost Component Structure by Assembly Line and Item (ticpr3161m000)</GUIRef> session.</Paragraph>
			<Paragraph>If an item's cost component structure has changed, or the valuation price or cost price for an FTP item, <GUIRef href="/baanerp/wh" role="package">Warehouse Management</GUIRef> adjusts the inventory value of a warehouse. The inventory value adjustment processes the actual order price into the inventory value of the items. The value correction is posted to <GUIRef href="/baanerp/tf" role="package">Financials</GUIRef> and is stored under a revaluation order code. The revaluation order code is generated automatically and can be viewed in the <GUIRef href="/baanerp/ti/cpr/ticpr3501m000" role="session">Item - Standard Costing Data (ticpr3501m000)</GUIRef> session. You can use the revaluation code in <GUIRef href="/baanerp/wh" role="package">Warehouse Management</GUIRef> to track the valuation changes.</Paragraph>
			<Note><SectionTitle>Note</SectionTitle>
				<Paragraph>You cannot actualize cost prices of a <Link href="/baanerp/ti/glossary/glossary#000023" role="glossary">project</Link> of the type <GUIRef href="/baanerp/tc/domains/kopr#budget" role="enum">Budget</GUIRef>.</Paragraph>
			</Note>
		</GeneralSection>
	</GeneralSection>
</ManualTopic>
