Cost Allocation
When creating output lines for Production Orders, it is crucial to manage the capacity costs and value entries associated with Co/By-Products accurately. This section outlines the behavior and validation rules for Co/By-Product output lines, with a specific focus on capacity costs and time-related fields (Run Time and Setup Time) across various scenarios.
Capacity Cost Distribution
Work Centers with Unit Cost Calculation = Time
When completing a Production Order, the system will review the Capacity Ledger Entries associated with that order. It will check if any work center or machine center has the Unit Cost Calculation set to Time. If this condition is met, the system will calculate and allocate the Run Time and Setup Time costs between the main item and the respective Co/By-Product(s).
This calculation will be performed only once per work center to prevent double-counting the times. The distribution of time costs will be determined using the following formula:
Distribution = (Total Run or Setup Time - Total Run Time already distributed) / (Total Output - Output already distributed) * Output Quantity for the line
- Total Run or Setup Time: The total time allocated to the work center.
- Total Output: The total output from the Production Order line.
Work Centers with Unit Cost Calculation = Units
For work centers where the Cost Calculation Unit is set to Units, costing is based on the quantity produced rather than the time each machine is used. Since multiple items (main items and Co/By-Products) are produced simultaneously, users must choose how the cost will be allocated:
- To all items produced (each item has its own capacity cost)
- Only to the main item
When Capacity Cost Allocation is set to Quantity Proportional in the Manufacturing Essentials Setup, the behavior for Co/By-Products will depend on the configuration of the Cost Applicable to Co/By Products field.
When Cost Applicable to Co/By Products = None
The system will set Unit Cost, Unit Amount, and Unit Cost (ACY) to Zero for Co/By-Product lines and fields will be not editable. This prevents Co/By-Products from receiving any capacity costs, ensuring that the costs are only assigned to the main item. This value is set by default.
When Cost Applicable to Co/By Products = All
The system will treat the Co/By-Product as if it were a main item. No distribution of costs will be applied. Instead, costs will be calculated for all items produced in the same manner as for the main item. When posting the Production Journal, the system will multiply the Output Quantity by the Unit Cost, applying the same cost calculation method used for the main item.
Posting the Distribution
Once the distribution is calculated, new lines will be created and posted to the Production Journal, containing only time-related fields (Run Time and Setup Time). The distribution will be applied as follows:
- Main Item: The calculated distributed Run Time and Setup Time will be subtracted from the main item.
- Co/By-Products The distributed Run Time and Setup Time will be added to the respective Co/By-Product lines.
Setup Time Inclusion Based on Configuration
The inclusion of setup time in cost distribution is determined by the Cost Incl. Setup setting in the Manufacturing Setup. If this setting is enabled, setup time will be included in the cost distribution. If it is disabled, setup time will be excluded.
Handling Lots in Output
If the output includes lots, the Run Time and Setup Time distribution will follow the same logic, with each Co/By-Product being assigned a time entry per lot. Upon completion of the Production Order, the system will divide the distributed times across the lots according to its standard behavior.
Rounding Precision
Time costs distribution (Run Time or Setup Time) should be calculated with a rounding precision of five decimal places to ensure accuracy, especially when dealing with fractional time allocations.
Zero Run Time or Setup Time
If the main item has a Run Time or Setup Time value of 0, no cost distribution will occur for that work center, even if the work center’s Unit Cost Calculation is set to Time.