| # Cost calculation methods The cost calculation method determines how a product structure is analyzed during the calculation the standard cost and valuation price. Note In a multisite environment, an item can have multiple standard costs. The cost calculation is always performed for an item and enterprise unit combination. The BOM that follows is used to explain the calculation methods: Top-down LN calculates the standard cost of each item that affects the standard cost of the selected item. During a cost calculation, LN analyzes the structure of the item by means of the Bill of Material (tibom1110m000) session. Example When the standard cost of item C in the example is calculated, LN calculates the standard costs of items E, D, and B in this sequence. Single-level: similar to the top-down method, except the standard cost and the valuation price of the underlying structure that already exist, are adopted. Example When the standard cost of item C is calculated, LN reads the prices of items D and B in the Item - Cost Price Details (ticpr2505m000) session. Bottom-up LN searches the structure for items that are used in a bill of material at higher levels, by means of a where-used process. These items are included in the cost calculation process. Bottom-up means that the price of each item is calculated, because of a change in the price of the chosen item. The prices of items that are on a lower level in the BOM are not calculated, but are read in the Item - Cost Price Details (ticpr2505m000) session. Example When the price of item B in the above figure is calculated, the price of items A and C will also be calculated. Related topics Calculation of cost/valuation prices for standard/customized/STO items Standard cost price Cost price and valuation price Standard Cost by Enterprise Unit Cost Calculation Process Valuation prices for standard/customized/STO items Introduction on FTP and actual costing |