Costing: how it is calculated

This section describes how the system calculates the cost of an item when a manufacturing order is executed.

The description is based on the logic implemented in the manufacturing order costing module.

General idea

Cost is calculated based on actuals:

1. First, actual material consumption is recorded in the manufacturing order.
2. Based on actual consumption, the material write-off cost is calculated.
3. The sum of write-offs (plus additional cost components, if any) forms the manufacturing order cost.
4. The order cost is distributed across output (output lines) using cost ratios.

What is included in the calculation

1) Actual material consumption

The manufacturing order has material lines. For each line, the actual “Consumed” quantity is recorded.

Only lines where:

• actual consumption is filled in;
• the item is a stock/material item (participates in inventory accounting)

are included in costing. The material write-off amount of a line is shown in its Cost column.

2) Materials location and Execution date

Consumption cost is determined taking into account:

• the Materials location (location used for write-off);
• the Execution date of the manufacturing order.

Practical meaning:

• if different locations have different costs, write-off is valued by the materials location;
• the Execution date fixes the “valuation moment”, i.e. which date is used to take the cost.

3) Additional cost components (cost types)

Beyond the material write-off, the manufacturing order cost may include additional components. Internally they are unified as cost types: each type is a separate source that accumulates its amount on the order, and configurations can add their own types. They are computed totals shown read-only on the order — not fields you type into directly. The standard types are:

• Extra cost — accumulates the cost of scrap documents linked to the order;
• Labor cost — accumulates labor amounts from project time entries linked to the order (when the Project Management contour is used);
• Service cost — accumulates costs from supplier bills: a service line of a bill, distributed onto the order, contributes its share.

Each component appears only if the corresponding source data exists in your setup.

Service costs from bills use the standard cost-allocation mechanism (see Cost distribution in Invoicing): in the bill's cost distribution block there is a Manufacturing orders tab, where a service line of a bill can be marked Distribute onto open manufacturing orders; the allocation base can be the amount, cost, sales price, weight, volume or quantity of the order, and the Distributed share that lands on a given order becomes its service cost.

Formulas

Material cost

Material cost for the order (the Cost column) is the sum of write-off costs for all material lines.

In other words:

• for each material line, the write-off amount is calculated;
• then these amounts are summed into the order cost.

Total manufacturing order cost

Total cost of the order consists of:

1. material cost (Cost);
2. plus all cost-type components: Extra cost, Labor cost, Service cost (and any types added in your configuration).

The material cost and the per-output-line costs are formed when the order is moved to Done — the cost ledger entries that value the material write-off are created only for completed (Done, non-Canceled) orders, so the material cost stays empty while the order is in Draft / Waiting / Ready / In progress. The additional components behave differently: they are accumulated from their linked records (scrap documents, time entries, bill allocations) regardless of the order status, so they — and therefore the total cost — can already be non-zero before the order is Done. Marking the order Done also fixes the Execution date, which determines the valuation moment for the material write-off.

How cost is distributed across output

The order has output lines (which items/semi-finished goods are produced). The order cost is distributed between output lines.

Cost ratio

An output line can have the “Cost ratio” (distribution coefficient) filled in.

Line share calculation:

• if cost ratios are filled in on at least one line, then line share = line ratio / sum of ratios for the order;
• if cost ratios are not filled in, the whole cost is assigned to the main order item (the output line where the item matches the order item). For unbuild orders there is no such line, so without cost ratios the cost is not distributed to the components at all — fill in the ratios (they are copied from the Bill of Materials components).

Output line cost

The amount assigned to a specific output line:

output line cost = total order cost × line share

Unit cost

To get unit cost for an output line:

unit cost = output line cost / actual produced on the line

If actual produced is zero, unit cost cannot be calculated — record production first.

Where to see cost

Typically, cost is visible:

• in the manufacturing orders list — the read-only columns Cost, Extra cost, Total cost, plus Labor cost and Service cost when the corresponding contours are used;
• in the Total tab of the list (for selected orders) — the aggregated material Cost per item;
• in manufacturing reports — the same cost measures in the pivot report.

Typical situations and checks

Total cost is zero

Check:

• whether “Consumed” is filled in on material lines;
• whether the materials location is selected;
• whether the order is Done (the Execution date is set) — the material cost is valued only on completion.

All cost was assigned to a single output line

This is normal if cost ratios are not filled in. Then the system assigns the whole amount to the main item.

Cost distribution is “not as expected”

Check:

• cost ratios on output lines;
• actual produced quantities;
• whether extra/labor/service costs were added.