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# Calculate Standard Costs

### Introduction

Calculates the standard cost of manufactured products.

The Calculate Standard Costs process is run to generate the standard (= theoretical) cost.

Cost information is set up in several screens:

• in the process plan the use of the cost center is defined
• in the cost center the following cost is defined:
• employee information: salary category information as well as the quantity used per hour for the cost center. Based on these the cost of the employee is calculated. The salary category cost is entered in the Salary Category screen.
• machine information: the machine and usage information is entered in the cost center screen. The machine cost is entered in the Machine screen.
• indirect cost information: all indirect cost items related to a cost center are list. The indirect cost is entered in the Indirect Cost screen.
• in the process plan the quantities and cost of the materials used in the production process are defined.

For raw material the price list information is used for the cost of the P-. The purchase price list that is used for the raw material cost is marked as default: The cost information that is calculated for a product P+ is used when that product is a P- for another operation.

The formula that is used by the process is the following:
(Cost of Cost Center + Cost Employees + Cost Machines + Indirect Costs) + (Quantity P- x Cost P-) = the cost per unit.
When the costs of the cost center, machines, employees and indirect costs are calculated they are multiplied by different values depending of their unit of measure:
If per Hour is used, the cost is multiplied by the Use of the cost center in the Process Plan
If per Unit is used, the cost is multiplied by the sum of the quantities of the P+'s of the sequence.
If per Kilogram is used, the cost is multiplied by the sum of the weight of all the P+'s of the sequence.
For Indirect costs the additional unit of measure percentage is available. This adds the defined percentage to the total cost calculated (cost center, employee, machine, indirect costs and P- products). For example if defined as 1.15, an additional 15% is added to the cost.

Note:
For the Indirect Cost to be included correctly, the following configuration is important in the Indirect Cost screen:

• select Cost Type = Production,
• a date range that includes the date of the standard cost calculation in the [Value] tab

This way the standard cost for each operation is calculated. The outcome of the calculation appears in the tabs of the Process Plan:
In the Employee, Machine and Indirect Cost tabs, the result of the costs are automatically populated.
Results can be reviewed on the Standard Cost Report.