Bills of Material: Updating Standard Costs

Steps to Update Standard Costs

When you want to update standard costs of items to be produced, you perform the following general steps:

1. You update purchased and transferred items with the Standard valuation prior to the cost rollup process. If you have not yet updated the standard costs for the materials used in the BOMs, you can select the Use Pending Standard Cost for Purchase Items check box on the Cost Roll (AM508000) form. In this case, the system will use the pending costs instead of standard costs for the materials that are purchased.
2. You roll up the costs for the bills of material by using the Cost Roll (AM508000) form. For more information, see the Cost Rollup for BOMs section below.
3. You update the pending costs with the costs calculated by the rollup process for the BOMs on the Cost Roll form. For more information, see the Pending Cost Update for BOMs section below.
4. You preview the cost changes for materials by using the Standard Cost Change Preview (IN617500) report to make sure that the costs are correct and to understand the impact of the inventory revaluation.
5. You update the standard costs for the items to be produced by using the Update Standard Costs (IN502000) form. For details, see the Standard Cost Update for the Items to Be Produced section below.

Update of Standard Costs for Materials

Before you roll up the costs of a bill of material, you should update the standard cost for each material that is used in the BOM, has the Standard valuation method. You can use either of the following ways:

• Specify the pending cost for each material manually on the Price/Cost tab of the Stock Items (IN202500) form and then update the current cost by using the Update Cost command on the same form.
• Create a generic inquiry to display the purchase order history. By using this generic inquiry, you analyze and calculate a new standard cost that could be imported to update the pending costs of the materials. If you want to select only items used in BOMs, you can refer to the Using Manufacturing Data in Inquiries and Reports topic that lists the DACs used by the manufacturing-related forms.

Cost Rollup for BOMs

To calculate costs for bills of material based on the costs of BOM elements, such as materials, tools, or overhead, you do the following on the Cost Roll (AM508000) form:

1. In the Level box of the Selection area, select Multi or Single to calculate costs of the bills of material and the subassemblies included in the BOMs. We recommend selecting Multi to roll up costs level by level from the bottom up.
2. In the Selection area, select the desired elements, such as Include Material Scrap Factors.
3. On the form toolbar, click Roll Costs and wait until the process is completed. The cost of the bill of materials are now rolled up.
4. Review the costs in the grid.

You can run the cost rollup process as many times as you need.

Pending Cost Update for BOMs

When the cost rollup process is completed, on the toolbar of the Cost Roll (AM508000) form, you select the rows of inventory items you want to update and click Update Pending. The system updates the pending costs of the items assigned to the BOMs with the calculated costs on the Price/Cost tab of the Stock Items (IN202500) form. Only items with valuation method Standard will have the pending cost updated.

Standard Cost Update for the Items to Be Produced

You update the standard costs of items to be produced by using the Update Standard Costs (IN502000) form. During the update, the system does the following for each item to be produced:

• On the Price/Cost tab of the Stock Items (IN202500) form for the item or the Item Warehouse Details (IN204500) form for the item–warehouse pair, copies the value of the Pending Cost box to the Current Cost box in the Standard Cost section.
• Sets the Pending Cost to zero.
• On the Adjustments (IN303000) form, creates an inventory adjustment to update the Inventory GL account and Standard Cost Revaluation GL account and releases the adjustment.

Inventory is always revalued when you update standard costs. However, you might want to revalue inventory without updating the current costs of the items to the next pending cost. In this case, on the Update Standard Costs form, you can select the Revalue Inventory check box. With the check box selected, the form shows all items with the Standard valuation method that have cost layers in the warehouse selected in the Warehouse box. When you run the update process, the system revalues the inventory with the current cost, but the current cost will not be updated with the pending cost for the items.