Calculated Actual Costs

Starting with the 2.1 version of the Cost Calculator, Progressive Edge has introduced a new concept to Cost Analysis call the Calculated Actual.  Basically the Cost Calculator will calculate your theoretical costs based on the historical Job and Purchasing transactions over a given timeframe.  This allows you to easily compare this theoretical cost to your M2M Inventory cost (generally Standard) to determine the accuracy of your M2M Costs .. and your true profitability.

Make to Stock Actual Costing (sort of)

Depending on your Costing Method, M2M uses the Standard or Estimate Average to cost Make to Stock Items.  These are the same costs used to report on profitability.  The problem is that these costs can become very outdated in this time of extreme material volatility.

A real example in today’s economy is that raw material prices are all over the place, generally upward.  Sure, you could see these cost increases from the Payables side of things and Purchase Price Variance.  But how will these price increases affect the Finished Goods?  You won’t know that until you do a Cost Rollup or look at each item individually through the costed BOM report.

With the Cost Calculator, you can see how these increases affect your profitability immediately.  The Cost Calculator allows you to roll the Actual Costs of a selected number of Jobs and PO's, to calculate a true Actual Average Cost based on all levels of the product structure.  We call this the Calculated Actual Cost.

For example setting the Job Count to 3 and the PO Count to 2, the Cost Calculator will perform a theoretical Cost Rollup to the Sales Order Level, using the Average Labor and Overhead for the last 3 Jobs (at all levels), and using the Average Invoiced Material Cost for the last 2 PO's of each component (at all levels).  Setting these values to 1 will give you a Cost Rollup to the Sales Order based on the Last cost of all items in the product structure.  Other settings allow you to trim off the high and low values prior to this calculation.

So if the price of a component used in a product went up, say steel, you would immediately see its cost reflected all the way up to the Sales Order level, without having to roll your standards.  In addition, the rolled up costs will be based on the Actual Costs incurred, not the Standard cost.

Now imagine setting a Performance Indicator to highlight all of the Orders where my Calculated Actual Cost is different from my Standard Cost by more than 10%.  You can now manage your exceptions.

Make to Order Actual Costing (better)

As we all have been told by M2M, Make to Order is Actual Costing.  Well, not really.  Sure, the Make Jobs collect the Actual Costs posted directly to them, but any Stock materials (purchased or manufactured) are issued to the Job at the Inventory Costing method (generally Standard).

So again, M2M will not reflect the price increases of Stock material issued to the Make to Order job, unless a cost rollup has occurred.  The Cost Calculator will roll these costs in a similar manner as described above for all Stock material.  Make or Buy Items will still be costed as they currently are.

With the Cost Calculator, your Make to Order Sales Order Profitability can now be based on the Calculated Actual Costs which uses the Actual Costs for Make and Buy items, and the Actual Average for Stock Items in that product structure.

Full Drill Down to Calculated Actual Detail

Continuing on the concept of “Intelligent, Interactive Reports”, when you drill down on a Stock Item a full Indented Product Structure is presented showing both the Calculated Actual Costs and the Current Standard Cost.  This allows you to compare the costs and easily identify the part (or parts) causing the discrepancies.  Drilling down from here will present the Jobs or PO’s used in the calculation of the Calculated Actual Cost for that part.  All of the Information is presented so that you can easily identify how this number was calculated.