Hi friends, i’m confusing an issue like below :
I have item 1250. It link with a Routing with information :
Setup time is naturally a static time not related to the quantity of the item being produced, so when setup time is brought into the stadnard cost it can be treated differently, these fixed costs look to a predefined batch size of the product to associate an element of the cost to the item, as it is not correct to associate the entire cost of the setup to 1 item when you may have a standard production batch of 100. This is different to the run time as this is the run time per one which will be fully costed. The stadnard production batch is entered in the lot size field on the item card, so look at 1250 and you will have a lot size of 10, which is where your division by 10 is coming in when calculating the setup standard element cost per individual unit.
Hi Friends,
When calculate cost either standard or unit cost, why only setup time and runtime include in calculation cost but not move time neither wait time? Is it because move time and wait time is only a small number?
Thanks
It is because they are not considered direct contributors to the cost. this is certainly true of move time, this is simply waste in the process, and arguably any chargeable wait time is actually a process time against a wait operation, but personnally I would prefer wait time to be included, however I see the argument why it is not.
thx adam. I got it. [:)]
I read that in calculate Standard Cost, Lot size just affect Setup Time and not Run Time. But when i try input a number, i think the formula is like this :
It does not, look at your calculation again, unless you are running a version with a modification/bug etc.
Item 1250 has routing as below. Lot Size = 15. Scrap Item = 8%
Setup Time : 60 minutes
Run Time : 5 minutes
Fixed Scrap Qty : 12
Scrap % : 20
Concurrent Capacities : 3
Unit Cost Per : 3,350
When i calculate Standard Cost, i got 75,308
I assume the formula is like this :
= [(Unit Cost * Setup Time * Concurrent Capacities)/Lot Size] + [Unit Cost * Run Time * (1+Scrap Item %) * ∑(1 + Scrap Routing %)] + (∑Fixed Scrap Qty * Unit Cost * Run Time / Lot Size)
= [3,350 * 60 * 3 / 15] + [3,350 * 5 * 1.08 * 1.2] + [12 * 3,350 * 5 / 15]
= 40,200 + 21,708 + 13,400
= 75,308
I;m using Navision 4.0
hi, can anyone help me… need urgent…
What you need to do is strip it all away and start with something basic and build it up, in that way you will understand how it works.
Start with just a BOM, then add a route with run time, then add in the setup time, then the scrap etc. If there is then an issue you will know where it is.
The standard cost will include the BOM elements, so just knowing the routing here is no help. In fact remove the BOM from the card - what is the standard cost then?
Also you do not tell us the cost NAV gave you, or UOM of the cost etc etc.
This post is also marked as resolved, so you will get less people looking at it.
I only set Routing in Item, and already remove BOM. I got the same value from NAV 75,308. From that value, i assumed the formula. but i confused why lot size used in Run Time. maybe someone know what is the formula to calculate standard cost? thx a lot
Like I said, start REALLY simply to test things like this.
Use your favourite 1250.
I have one routing step, 60 minutes setup, 5 minutes run time, a lot size of 10 and a unit cost of 1.00 on the work centre. The manufacturing standard cost at all levels gives me 11.00. Have NOTHING else set, no scrap, not concurrent capcities etc.
So setup time is 60/10*1 = 6 whilst run time is 5 therefore I get 11. If it took the lot size into run time I would have got 6.5
Replicate this - what does it do, if it gives you 6.5 report it to your partner, or MS as a bug.
I already replicate that. The result is 11. But what i mean is when there is fixed scrap qty. It divided by Lot size too. From your example, i add fixed scrap qty = 2. It results 12. because fixedscrap * cost * run time / lot size = 2 * 1 * 5 / 10 = 1. Why it divided by lot size?
It is exactly the same principle as setup time.
Fixed scrap quantity is a fixed amount no matter how many are produced, therefore when costing the “best” estimate is to take what you have told the system is the standard production batch and base the cost on this.
Anything that is variable to the production will not include the lot size, anything fixed will take the lot size into consideration.
Ok. Got it. Do you have any idea why this lot size just affect in calculating Standard COst and not in calculating Unit Cost? sorry if i’m asking too many question. Thx
The unit cost should be capturing the actual time and materials etc when all costs are known, so there is no need to use a lot size, it actually knows how many you produced, the lot size gives the calculate standard cost routine a chance of apportioning the costs like setup time down to the unit level to give a sensible standard cost suggestion, the unit cost simply does not need it, it knows it from the processing.
Why Run time doesn’t divide lot size meanwhile run time is handled per lot size of the produced item.
Would you kindly re-phrase this as it does not make sense. What is your question here?