Cost Management

Cost is the total value expressed in monetary terms of all kinds of transactions incurred by the enterprises in order to obtain the goods or services in the field of activity. Monitoring product costs is a very important issue for businesses. Tracking direct and indirect costs enables businesses to accurately track their profitability ratios.

ERP > Sales-Distribution > Cost > Product Costs

In Workcube, product costs are recorded in two ways: General costs and location-based costs. General costs are recorded by calculating products based on system-wide entries. Costs on the basis of location are recorded by calculating all product entries made to that location in locations where cost tracking is performed. In the movements made from one location to another location, the cost of the product at the exit location is moved to the entry location by calculating according to the inventory method.

Things to Know Before Calculations

• In the weighted average method, an average price is calculated and the price of the first materials and materials sent to production and remaining in inventory is determined. Average price; It is calculated by dividing the sum of all the first items and materials purchased within a period, not after each purchase, by the total amount. In other words, the cost price calculated once at the end of the period, the amount sent to production and remaining in inventory is evaluated with the said cost price.
• On the production side {[ Total cost of raw materials and semi-finished products during the period + Total labor cost for the product produced during the period + total production overheads for the product produced (cost reflected from expense centers] / Total receipts during the period }
• It creates a cost record for purchase type invoices, delivery notes, inventory receipts, inter-warehouse transfers, each product included in the inventory, and cost tracking.
• When creating an invoice or delivery note cost record that performs costing, previously recorded costs for products are also taken into account. It calculates the purchase prices of the products according to the weighted average method and creates the net cost from the purchases. In addition, it creates additional costs by calculating the expenses added on the invoice with the weighted average method. In order to calculate the additional cost, an expense must be entered on the invoice and distributed to the invoice lines. The sum of the net cost and additional cost from purchases constitutes the total cost.
• When an invoice with a past date is posted, a cost record is created on that date. In addition, all costs created after that date are updated and costs from the newly added invoice are also taken into account. Updated invoices also update both the cost record they created and all costs recorded after that date. In the same way, deleted or canceled invoices also delete the costs they created and update subsequent costs.
• When a cost record is created, the costs of the products in the lines of all sales-type invoices, orders, and delivery notes recorded after the date of costing come from this record, until a new one is created.
• Updated, canceled or deleted invoices update the recorded costs as well as the lines in the sales transactions where these costs are passed. Thus, costs are tracked accurately.
• The costs of manufactured products are calculated by adding up the costs of their components. Each different spec generates its own cost.
• The costs of the imported products are created on imported Goods Entry delivery notes. The additional cost on the import invoice is carried to the Imported Goods Entry. At the same time, the additional cost can be corrected by re-entering the expense in the Imported Goods Entry.
• In order to track the inventory costs correctly, the costs of the inventories must be entered in the inventory opening receipts.
• The price difference invoices issued after the checks on the Compatibility with Contract-TPD Conditions screen on the invoice update the registered costs of the products on the invoices they are linked to. Thus, cost changes resulting from price differences are recorded.

Cost by Currencies

Example for USD cost calculation method;

• Let's record a purchase invoice on 11.05.2021 where we bought 10 products for 10 USD.
• Let's buy 20 products for 20 USD on 12.05.2021.

New cost: (10 x 10 + 20 x 20) / 30 = 16.6667

Total inventory cost is 500 USD

• Let's sell 5 of these products on 13.05.2021. 5 products are deducted from the cost of that date.

New cost: 5 x 16.6667 = 83.3333

The total cost would be $416.67 USD.

• Let's buy 30 more of the product for 30 USD on 14.05.2021.

New cost: (25 x 16,667 + 30 x 30) / 55 = 23.9394

The total cost would be 1,316.67.

• Let's sell 10 of the product on 15.05.2021.

Total cost would be: 1,316.67 – (10 x 23,9394) = 1,077.27.

• Let's return 1 product to our supplier on 16.05.2021. Although purchase return invoices are sales-type, they create a cost record.

When creating the cost record, the calculation is made over the price at which we returned the product.

In this example, although the unit cost of the product is 23.9394 USD, let's return it at 30 USD.

New cost: (45 x 23.9394 – 1 x 30) / 44 = 23.8016

The total cost would be 1,047.27.

• Let's record a Sales Return Invoice on 17.05.2021. In sales returns, the products enter the inventory at the current average cost.

Therefore, Sales Return Invoices do not create a cost record. It just changes the total cost. In the example here;

The total cost is now 1.047.27 + 1 x 23.8016 = 1.071.07.

Calculation according to System Currency, System 2. Currency and Transaction Currency. Their costs are calculated independently of each other according to these 3 currencies. E.g;

• We buy 1 piece of goods for 100 EUR. According to the exchange rate of that day;

TL equivalent: 980 TL (EUR exchange rate 9.80)

USD equivalent: 131 USD (USD 7.50)

• Then we buy 1 more for 200 EUR. According to the exchange rate of that day;

TL equivalent: 1920 TL (EUR exchange rate 9.60)

Equivalent to USD: 259 USD (USD rate 7.40)

• In this case, the new costs are:

EUR: (100x1 + 200x1)/2 = 150 EUR

USD: (131x1 + 259x1)/2 = 261 USD

TL : (980x1 + 1920x1)/2 = 1940 TL

You can check the cost history by going to the costs from the product detail after the transactions.

In Workcube, costs can be tracked in 3 different currencies.

System Currency: It is defined under Dashboard > System > Period Transactions > Accounting Periods. Indicates the main currency.

If it is USD, it appears as net cost (USD), additional cost (USD), and total cost (USD) on the product cost page.

System 2nd Currency: It is defined under Dashboard > System > Period Transactions > Accounting Periods. Currency that is different from the main currency.

It is recommended that it be selected at the beginning of the period and not changed, as updating it during the period may result in inconsistent entries.

If it is EUR, it appears as net cost (EUR), additional cost (EUR), total cost (EUR) on the product cost page.

Standard Purchase Currency of the Product: It is selected in ERP > Sales-Distribution > Product and Stocks > Product card.

On the product cost page, net cost, additional cost, total cost are calculated according to the selected currency.

After choosing the preferred currencies, the cost calculation method is selected in the company flow parameters to determine the calculation method of costs.

• Calculated from USD Currencies; costs are calculated in USD and foreign exchange costs are calculated from that day's exchange rate.
• Each currency is calculated within itself; TL costs are calculated within itself, and foreign currency costs are calculated within itself, without considering the exchange rates.

On 05/05/2021, we bought 1 product for 15 EUR. Let the rates be USD=8 and EUR=9.

In the product cost card, the costs will be as below.

Net Cost (TL) = 15 x 9 = 135 TL

Net Cost = EUR 15

Net Cost (USD) = ( 15 x 9 ) / 8 = $17

Let's get the same amount of the same product at the same price on 10/05/2012. Let the rates be USD=8.5 and EUR=10

If each currency is calculated in itself

Net Cost = 15 + 15 / 2 = 15 EUR

Net Cost (USD) = ( 17 + 15 * 10 / 8.5 ) / 2 = 17.3235

Net Cost (TL) = ( 135 + 15 * 10 ) / 2 = 142.5

The table in the Cost History is as follows.

If Calculated from TL System Currency

Net Cost (TL) = ( 30 + 15 * 10 ) / 2 = 90 TL

Net Cost = 90 / 10 = 9 EUR

Net Cost (USD) = 90 / 8.5 = $10.58

The table in the Cost History is as follows.

You must have made the settings and definitions of costs completely and properly. However, after healthy definitions, the cost function starts to work, and cost - profitability reports give healthy results. For definitions on costs, you can review the "Cost Parametric Definitions" document.