Standard Cost Roll

[mchad07]

Hello,

My company uses a standard cost system. A cost roll to update standard costs is performed on an annual basis. As a company that manufactures highly technical capital equipment, the purchase parts, raw material, and technology changes many times throughout the year. I am trying to draft criteria that if met, would require a cost roll of a piece of equipment at any point in the year. Does anyone else out there have written policies that require updating the standard costs of equipment prior to year end if the criteria is met? Any help would be appreciated.

Thanks,

Version 9.1 enterprise 1
Tools release 9.1.5.5

 

[Larry_Jones]

My company also builds capital equipment in a Engineer to Order environment.
As such a large % of our items are new / project specific. Other items though are common.

We use Standard Cost but not in the traditional manner. We cost roll new parts on an ongoing basis (of course), and common parts / affected assemblies whenever the variance between standard and "actual" exceeds a certain %/$ value.

On a quarterly basis we Cost Roll everything.

A key part of our ongoing process is the use of a Item Definition "Status" field in the Item Branch (we relabeled the Flash Message / IFLA Code to Item Status). The status code identifies the current status of the Part Definition.
A new Item starts off with NI - New Item
If its a purchased item the next Status is PR - Purchasing Definition Needed.
If Manufactured it goes to BR (Bill Required) then RR (Routing Required).
The branches converge again at CR (Cost Rollup Required)
and then end up at AA (Item Definition Complete).
Groups responsible for the different areas can query based on Status code for Items needing their attention (Purchasing looks for PR items).

There are actually a lot more possible steps in the process (QA Review, Design Review, etc) but the above is the main process flow.
If Purchasing group, Mfg Engineering, or our Mfg Cost Accountant identify any substantial changes that would affect the cost of a item the Status code is changed to CX (Cost Reroll needed). These CX parts are then picked up in the Cost Roll using a version that calls out only CR/CX parts.

So basically we're continuously updating our "Standard" costs to reflect either what we think its going to cost us to build (before we ever build it) or what it actually should cost us to build it again (after we've built it and adjusted BOMs and Routings to reflect reality as needed). We typically update the standard costs for our project items before we ship so that we then run Sales Order Cost Update to update the SO with a very close approximation of the actual cost.

This may make some accountants shudder but it makes a lot of sense for an Engineer To Order company.

Not sure this helps but maybe it will give you some ideas.

Cheers,

 

[RussellCodlin]

Twelve months is a long time between cost roll ups unless you have very stable input costs. The approach that Larry's company takes is fairly sophisticated use of standard costing and would take some time to implement to ensure that the correct discipline is applied. My suggestion for your situation would be to start with suggesting a move from annual cost rollups to quarterly cost rollups. This should remove some volatility in your manufacturing variances. One area you just have to manage is the amount of WIP you have at the end of each quarter as this can be a pain to deal with.