how does AX calculate the cost of production BoM in 2012?

Hi, we are using FIFO. I understand the AX uses the running average to calculate the cost price of the raw material. But how about the cost price for BOM in the production order?

When the production is started, the material consumption shows the cost prices of the raw (here AX uses the running average which shows correctly in our case).

Howerver, how could I let AX calculate the production BoM cost price (based on the material cost and / or labor indirects) automatically. I know there is an option in the production control parameters (we use manufacturing execution) somewhere I couldn’t find it.

here we want the RAF to match the material consumption (as we don’t have labor and overheads). But AX picking up the cost price from Finished Good Items - cost price as manually entered, instead of calculating it from the raw materials

I know we can run the BoM calculation and activate it - however, will it automatically change as the receipt costs change?

appreciate your help


Just go through Inventory and warehouse management Module and do the costing sheet setup and create costing version and calculate BOM.



Hi Selva, i have the costing sheet and version set up already. I can simulate the BoM price and even activate it. but my question is

  1. with FIFO, the cost price of the raw materials are in a flux so will it automatically reflect on the bom price, especially when you run the production bom where the report as finished is coming from the estimated cost of you bom ( material, labor and OVH).

  2. do I need to run the bom calculation and activate it in order for Production order to reflect the cost of the bom? Should this be done every time you run the production order?


If you follow standard costing, system knows the exact price for our all rawmaterial cost for a certain period as per version declared.

If any change in the rawmaterials price as per new version what we are doing, we are running the calcultaion and get the estimated price for a finished goods(single or multilevel) where as if we follow weighted avg or FIFO, we must declared price via planned cost only, then this price is not a standard one for a particular period since it has changed by the system frequently depends up on the receipt and issue of items. Hence, you must run the BOM calculation before excuting the production order for updation of the estimated price(weighted avg price only not FIFO). Then PPV, we can get after closing the inventory period with FIFO value even though weighted avg already calculated in the earlier now reversed.

Just go through the AX inventory valuation white paper



Patrick take an example of your manually entered cost and this is what is in WIP, however when you close the order it will remove this from WIP and calculate the cost. There is a paramter in production for estimated or actual, set this to estimated and it will take the BOM estimation cost as the output inventory cost into WIP but this is WIP, it changes at ended and each inventory close as teh components are invoiced.

Hi Adam, i want to ask where can I set the AX to use actual cost of finished item while posting RAF. I could see “Use estimated cost price” check box in the production parameter but not actual price. Is that picked from the Item master or the average Inventory cost price

also when i run the bom calculation (with planned costing version), AX doesn’t seem to pick the inventory cost price but rather it picks from the item master -is it. so perhaps i might have to tick the latest cost price for components and then run the bom price calc - Is it normal to use “initial” cost price for production BoM to estimate @ RAF (but Ax does correctly when posting the actual at end)

You either use the estimated cost as per the parameter defined, which is the estimation process of the order update which is the best guess at the time, or you use the current cost on the item card. The actual will always get flushed through later.

Thanks Adam. what I found is that in the case of “use estimated cost” for RAF, AX run the calculation but picks the cost price of the raw material based on what’s input on the item card but NOT based off the inventory cost price which I was hoping for. (unless I tick the latest cost price for components). For material consumption, AX uses the inventory cost price (running ave) but for RAF, it either picks the value input on the item card or runs the estimation. {even when AX runs the estimates, it doesn’t base off inventory cost price from what I understand). Problem comes, if we miss-out entering cost price for either components or finished item. In such case, AX may report as zero or different than the inventory cost.

so while order in RAF stage, the reported cost of finished item may be different from average cost price (which is anyways gets flushed out at the end) but the difficulty is - to determine the value of inventory while in process more accurately! it makes even more sense to complete the orders or at least cut the shorten the stage between RAF and End. Is it?

Yes it uses the inventory cost price, feeling it might also look at latest price on the item record (Price selection). Latest cost price gets you closer.

RAF to end depends upon the open elements ultimately.

Yes it uses the cost because this is how it “estimates” it then runs through the pull up calculation to take “estimated” to actual - which in itself it will still move.

Hi Adam, thanks for the clarification. Appreciated. Unless I use the “latest cost price” for components and have AX use the estimates for FGI at the time of posting RAF, what I see is that AX picks up the cost price from the Item Card that’s manually entered! But it’s not the case with material consumption posting where AX picks up the inventory cost price.

Another question - If I track “physical value” from Item Model, I wonder, if i may be able to bridge the WIP value close to accurate! Is it a good idea to use physical value?

From what I understand AX settles financially updated Issue to first financial receipt (not sure if it would settle physical receipts) however, the running ave includes both physical and financial amounts. Also not sure about this statement - “Where applicable, the system also makes adjustments to the physically updated issue transaction”

The whole bridging of the gap depends upon the fluctuation of the costs ultimately. AX takes a snapshot in the estimation, that is all, the actuals will get pushed through and ultimately WIP is WIP and it is using the costs flowing through the system at the time and if the End is not months after the RAF there is generally no problem. I believe the statement relating to the adjustment to the physical updated issue transaction would relate to the situation where you are using a cost that is not financial, so with a new item you may not have invoiced it, but you need to consume it and the physical cost is used, with the average update with physical ticked it means the average is updated for a receipt, so if I receive and invoice one for $10 and receive one for $12 if I include physical in the calculation the cost is $11, if I do not it is $10. Depending upon how you physically track (by batch lets say) the system could then adjust for the $12 (although I am not sure it means this, you would need to set the example up and run it through). Ultimately as it all flushes and WIP is a snapshot I would not unduly worry unless you have highly fluctuating costs and long periods of RAF-End. Not setting item costs is not really an excuse, it is all part of the required data maintenance to get the item on, if you don’t know it then it pushes it through at 0 and adjusts later, still arguably taking the best information you have.