Process Model Costing
Introduction
In the Process Model Costing section, we utilize the information as defined and detailed in the Inputs and Tasks documents.
Refer to the documents titled Process Model Inputs, and Process Model Tasks.
The next step is to calculate the manufacturing cost of the item, thus, enabling us to set a selling price.
This is a crucial step in understanding the financial aspects of the production process.
In order to calculate costs & set the selling price, you will need to return to the Process Model as previously created, with Inputs and Tasks defined.
Navigate to Costing TAB
First let's look at the layout. You'll notice a search panel at the top. Here, you can adjust the Focus Date, which determines the date for which the materials are costed. By default, it's set to the end of the month. The second parameter is Include Waste Allowance. This determines whether cut materials are charged for the used portion only or whether waste material is also charged for. Lastly, you'll find the formula being used. For now, we're using the Standard formula.
The bottom panel show the selling price formula with the various price components filled in.
The central panel contains a collection of pages. These are located on the right-hand side of the screen. The initial page is 'Materials.' Here, we can see how material costs are derived. This grid lists the materials entered on the Inputs screen, providing additional information related to costs. Within the 'Sourcing Information' band, you'll find details about our preferred supplier for each material, along with their current price. Keep an eye on the 'Price Date' column, which will be highlighted in red if the last updated price is significantly outdated. Using both the required quantity (entered on the Inputs tab) and the Unit Cost of the material, the system calculates the Nett Cost for each material. Individual material costs are tallied, showing the total material cost at the bottom of the grid.
The Task section shows the breakdown and totals of task costs. This grid displays the tasks as entered earlier, along with their respective task rates. To view or adjust the task rates, simply click on the Task Rate button and adjust the rates.
By combining the task duration with the task rate, the system calculates the total task cost.
Moving on to the Formula page…, here you'll find the step-by-step calculations of the Selling Price.
Lastly, the Summary page provides a comprehensive overview, listing any errors or warnings encountered during the calculation of the selling price. Additionally, you can compare the newly calculated price to the current catalogue selling price.
Once you've reviewed and corrected any crucial errors, and you're satisfied with the resulting standard Cost price and the Selling price, you can set save these costs. To do so, click on the 'Set Price' button, and a dialog will appear. Simply click 'Save' to update both the Standard cost and the Catalogue selling price.
The final step is to activate the process model. Navigate to the Output Tab on the main screen. Press the Reload button to view the current required action. The action will now change to 'Do Activate.' Click 'Activate.'
Congratulations! You now have a fully operational Stand-alone Process Model. The Selling price is available in the factory's customer catalogue and the factory can begin processing orders against this model.