Business Central Standard Cost Worksheet: Pt.9 of Production in Microsoft Dynamics 365
Today we are going to go into standard cost in production. So, we’ve been going on production things. Creating production orders bill of materials, finished goods, stuff like that but we’ve completely ignored costs. There is a reason for that, costing just is hard in production. It doesn’t matter what system you are using, there are so many different options of things you can do.
Roll up costs
What we are going to do is show you how to roll up costs as a fist thing. I create two new items here. Standard coffee beans and standard ground coffee. The reason why it's called standard, the costing method is standard. For the coffee beans, I’ve set up the standard costing method and its 3 dollars. 3 dollars for each pound, so what does it mean to have a standard costing? it's like they think is going to pay 3 dollars for this most of the time. So, I’m going to calculate 3 dollars when I’m estimating the cost of the finish good. And the system will handle variances from these 3 dollars, whether we are better or worse.
Also, I created the standard ground coffee, that’s also a standard costing method but I have not calculated the cost of this. Now the ground coffee is, of course, a production site, we make it. It has a production bill of material attached to it and if I go into that one and just look at it. I can see here we have standard coffee beans so 1 pound goes into making the strong coffee and it has a scrap percentage of 10%, so technically we need 1.1 pounds to make 1 pound of coffee.
Close this out, now what I want to do is have the system automatically figure out the cost for this based on the bill of material that is attached to. I have a simple bill of material, one item going into another item, that’s it. We could have many and scrap could be different on all these items. This could be hard to calculate, you could even have SEP assemblies meaning that some of the items made themselves, so they need to be rolled up.
How do we do this? well, there is a magic trick in NAV. It’s technical standard for most production systems. We go into something called standard cost worksheet and in here I can go ahead first and hit suggest item standard cost and I’ll just pick the item that I want to calculate for, which is going to be the standard ground coffee. Now it populates the worksheet with the standard ground coffee, but it has not calculated the new standard cost, so the old center cost is here, the new is still set at zero.
Now we need the system to roll it up to give me a new standard cost. If I go here into a roll-up standard cost. First, I select the item, of course, standard ground coffee, like so. Now I get the cost as 330, so all I have to do now is hit implement standard cost changes and It’ll update the cost on the item. It could also update the indirect cost, I can set that as new overhead rate and these are not calculated, this is something you set manually, and they basically add to the cot and accrued for that into accounting. We can go into that alter to show you how it works. But basically, you just hit implement standard cost changes, and then the new standard cost is taken in. So that’s how you do a standard cost worksheet.