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# Production Costs

 Production Costs are partially migrated to the new Cost Engine. All products with the production flag checked are calculated using an Average Cost and by client regardless the Costing Rule configuration. Since Openbravo 3.0 MP20 the Standard Algorithm fully supports the Manufacturing Costs and it is not overwritten to use the Average algorithm

The application calculates the cost for each product based on the real time used in the cost center and the consumed materials per unit produced, as specified in the work effort. The cost of the employee, machine and indirect are the same as for the calculation of the standard cost, but are now multiplied by the actual use of the cost center and divided by the number of units produced.

The formula that is used by the process is the following:

```(Cost of Cost Center, as indicated in the Work Effort + Cost Employees + Cost Machines + Indirect Costs) + (Quantity P- x Cost P-)/units produced on the work effort = 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 and divided by the number of units produced in the Work Effort:

• If per Hour is used, the cost is multiplied by the Use of the cost center in the Process Plan and devided by the number of units produced
• If per Unit is used, the cost is multiplied by the sum of the quantities of the P+'s of the sequence and divded by the number of units produced
• If per Kilogram is used, the cost is multiplied by the sum of the weight of all the P+'s of the sequence and divided by the number of units produced

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.