Hi everybody;
hope you are doing very well.
I want to ask question about the costing sheet , is the costing sheet used only to display the produced item cost or it can affect the produced item cost???
please advice
It can affect the produced item cost through the setup of indirect costs within the sheet. If there are no indirect costs it just displays the cost structure.
Hi AdamRoue, I had setup a cost sheet, but as my indirect costs are represented by service type items in the formula, I can not set them as Indirect costs becouse when you try to assign the Cost group to the items, AX says that for service type items the only type allowed are Undefined or Subcontract.
Related with best practices… how would be the best way to apply and control indirect costs (energy, indirect labor) whitin AX for production orders? What would be the general configuration process?
Thanks!!
Hi Hector
The general configuration would be to remove them as service items from teh BOM. You can then create an indirect cost node apportioned to the route and any machines to account for energy. Indirect labour would depend upon your definition and how you capture this, but ultimately you can place the indirects on labour and material as percentages of the total cost or flat rates and these get rolled into the cost and are visible subdivided into the appropriate cost group and post to the specified accounts against the indirect.
Ultimately if you have service items as indirects it does not matter, it is a cost representation, you could use the quantity cost category to impact as well. The difference you are experiencing is where you see it in the costing sheet, but if you gave it its own cost group you would see it split anyway - just not considered “best practice” for the software because the indirects are more powerful (different rates by cost group etc, as opposed to your flat item representation). I would point out I do not like the phrase “best practice” as it really has to be put into context and the software which may make it not best practice for certain sectors or industries.
As you say the indirects are more powerful than my item representation, I want to share a situation I’m facing and maybe it sounds familiar to you or maybe you know a way to work it out with indirects.
The situation (AX 2012) is that for energy (remember it is part of the formula as a service type item), the consumption made during the month for every production orders is based on an estimated cost, as the energy invoice for month 1 is received in the company on month 2, and many orders are already Finished, they ask to adjust those closed orders with the real cost of that energy item (service type). I’m still thinking the way of doing it with my job partners, but is this situation easy to handle with indirects costs?.. other thing is that I do not have routes as a requirement, but I think I can make one just for this purposes if needed…
Hi Hector,
As indicated by Adam, Indirect costs can be calculated on process, material by specifying in terms of percentage or flat rates and these are available as indirect cost transactions in the production. Here this is predefined methodology to arrive at the indirect costs based on the costs arrived in the previous months.
Comming to your scenario where you want to capture the actuals spent on the production orders for a given month, if you define these as part of your service items, actuals must be adjusted before you end the production orders and henceforth all the production orders reported as finished for the current month must be ended in single go at the end of the month and inventory closing must be run on monthly basis to ensure appropriate costs are adjusted in your transactions.
If you talk to a cost accountant they will give a different answer depending upon the requirements and the business. Essentially if you take energy as a bill the fluctuation of the energy bill does not change due to item production whereby if you had a percentage apportionment within the BOM, the fluctuation is because of other impact elements. If you cost accounted the energy cost of item X you may find out that the energy cost is $22.33 which is 4.1% of the labour cost (machine). Now if the energy bill comes in 13% higher because it is winter the cost of running the machine is NOT higher so raising the cost is not appropriate to the inventory valuation. There are of course arguments of other energy costs that are directly attributable, but the indirect variable is more difficult. So most would apportion the cost and see where the variation of this is - if indeed they track the variation. The idea is to gain an uplift in the valuation representing the overheads - in your situation can the business take the energy bill and apportion it to the cent to eveyr output item and every element not related to the item - general office heating and lighting etc. This is the apportionment issue and very few spent the time and money to get to the cent, because the return on this is little compared to the effort of analysis.
Prasad, AdamRoue, many thanks for your reply, comments and suggestions. I’m very gratefull with both of you to share your thoughts. I’ll be considering them!!
Thanks a lot!!
Héctor