Standard Costs : Item or Stockkeeping Unit?
Some time ago I talked about the possibility of managing different bills of materials depending on the item variant (you can find the post here). The functionality, introduced more than a year ago, consists in the possibility of associating the bill of materials (and also the cycle) on the stockkeeping unit rather than on the item, as shown in the figure below.
In the example above I created the Colorful Bicycle item with two variants: the BLUE and the RED. Their BOMs differ in the paint used in their production.
Assuming the routing identical for the two variants, I associated it directly on the item card, leaving blank the association with the BOM.
With this type of setup the planning engine works correctly, proposing different bills and the same routing for the production orders suggested by the MPS.
The problem on which we have to think about, is the standard cost.
Item or Stockkeeping Unit?
When managing items having Prod. Order as Replenishment System, we typically set the Costing Method field to Standard. This allows us to avoid, as we usually say, valorizing production inefficiencies (consuming more than expected or taking longer than expected), which are managed by the system as a deviation from the standard cost and not as an direct cost. However, since the standard cost is on the item card and on the USK, two doubts arise:
Since the cycle and the BOM can be specified on the USK card, is it possible to calculate the standard cost at the USK level?
When posting the output, is the cost taken from the item card or from the USK?
The answer to the first question is clear: no, there is no procedure that calculates the standard cost on the stockkeeping unit. Its value is copied from the item card when the USK is created and then it can then be changed manually.
Please note that with the previous setup, with the BOM associated to the USK and not to the item, the standard cost calculation is incorrect, because it considers only the routing costs. Consequently, in the case of items having different BOMs (or routings) per variant, in order to make a correct calculation of the standard cost we will always be forced to specify routing and BOM on the item.
What about the second question? Let's see an example with the following data:
The last line refers to item itself and I used the average value as standard cost.
Now, when we create the production orders, we can see that the Unit Cost on the line is taken from the USK.
What happens when we post the output? Well, the system uses the unit cost of the SKU as Cost Amount (Expected).
When we close the order and we run the Adjust Cost - Item Entries batch we can see this result
The system post a variance between the SKU cost and the item cost, so that finally the inventory value is based on that one of the item.