Product Cost Management

Cost is the total value, expressed in monetary terms, of any transaction incurred by the enterprises in order to obtain the goods or services within the scope of their activity. The tracking of production costs is a very important issue for businesses. Tracking direct and indirect costs enables businesses to accurately track their profitability ratios.

The costs of the products produced and sold begin to occur at the purchasing stage. Raw materials are purchased in production. However, in order for the costs of the products to occur and to be followed correctly, some adjustments regarding the cost must be made first.

• First of all, go to the product card of the product whose cost will be tracked and the "Cost Tracking On" checkbox should be checked. In this way, cost records will begin to form at the purchasing stage.
• If the product will be processed with any transaction category, the "Perform Cost Transaction" checkbox must be ticked in the relevant transaction category.
• In the Company Flow Parameters, the "Cost Transaction" checkbox must be selected.

• At the same time, the products whose costs will be tracked must make stock movements, that is, they must be included in the inventory.

Cost Creation

Costs can consist of both the invoice and the delivery note.The cost incurred when the delivery note is recorded is updated on the invoice when the delivery note is linked to the invoice. Purchased products, raw materials, consumables, labor expenditures are direct costs. When purchase invoices, production receipts, inventory receipts are recorded, direct costs are added directly to the cost of goods.

When an invoice is created to create a cost record, previously recorded costs for products are also taken into account. "Net Cost from Purchases" is created by calculating the purchase prices of the products according to the weighted average method. In addition, additional costs and expenses added to the invoice are calculated with the weighted average method, and "Additional Cost" is created.

Let's issue a purchase invoice to a purchase order. In our Purchase Invoice transaction category, make sure that the "Perform Cost Action" and "Perform Inventory Transaction" checkboxes are checked. When we save the invoice, the "Cost Running" popup notification will be opened and the system will generate the costs of the product. You can view the cost history by going to Product Detail > Cost.

Let's issue a purchase invoice for our product. The unit price of our product is 3000 TL. In this case, our Net Cost per Unit of the product will be 3000 TL.

You can examine where this cost is from by clicking the update button of the relevant cost record. You can also go to the document where the cost is incurred by this way.

If there is an additional cost for our product, an expense must be entered in the invoice and distributed to the invoice lines in order to calculate it. If you have "Additional Invoice Costs and Expenses" that are not directly related to the invoice, you can enter them from the relevant button on the invoice. It allocates the amount of your added "Invoice Cost and Additional Expenses" according to the amount and amount of the products entered in the invoice. (Total Cost x Unit Price of the Product in the Line) / Total Line Amount of All Lines) In this case, records will be entered in the "Additional Cost" field in the Cost History. The sum of Net Cost and Additional Cost from Purchases forms Total Cost.

Let's examine the cost history of a product for which three goods purchase invoices were previously issued in a linear time interval. Let's issue a purchase invoice for this product with a unit price of 450 TL. As you can see in the Cost History, when a new cost record is created, the costs of all products recorded after the date the cost is incurred are calculated over the new record based on the weighted average method again. The net cost is formed according to the three cost records previously formed in a fourth record.

Re-Costs

In cases where the costs occur in a linear time period, as we mentioned above, the cost of the product is always calculated according to the weighted average method over the most recent costs. Let's examine the case where costs occur on a linear plane in the Product Cost History below.

As you can see in the example case, the purchase dates of the product are linearly formed from 11/09 to 15/09. In this case, each added cost was recalculated over the previous cost, and finally, the final cost of the product was formed on 15/09.

However, cost records in businesses do not always occur linearly. The products can enter our stocks with the waybill, the invoice can come later. Refunds and discounts can be made on the invoice, an invoice received in the past can be updated, and documents with a past date can be created.

If it is a manufactured product, the "Re-Cost" operation must be performed in order to correct the non-linear cost records that are averaged in the weighted average method, such as the costs distributed at the product station, labor costs, and the reflection of the costs reflected from the production result to the documents.

In Which Situations Should Cost Be Re-Cost?

If changes are made to old-dated documents that shaped the cost of the product, if a retrospective invoice record is created, a cost record is created on these dates. All costs created after that date are also updated and costs from the newly added document are also taken into account. Deleted or canceled documents may not delete the cost records they created.

If changes are made in the raw material and semi-finished product cost, labor cost, general production expenses, costs reflected from the cost centers of the produced product, such cases may require recalculation of the costs.

Also, when the production is finalized, the production costs (labor, station, etc.), if any, are calculated and added to the product cost as an additional cost. In order to edit such non-linear cost records, "Re-Cost" is done.

Route: System > Maintenance > Re-Cost

Also, update generated documents: It updates the documents that have previously created cost records again. If not selected, it only generates the costs of documents that have not created a cost record.

Delete Manually Entered Costs on Deletion: If manual costs are entered manually in the cost history of the product, it deletes these costs.

Start / End Date: It is used as a filter. Run costs based on documents in the selected Date Range.

Document No: If you only want to delete, update or create the cost of a document, the relevant document number is entered in this field.

Product: Used if you want to rerun costs for a particular product only.

Source Period: In which financial period the cost is to be run, that period should be selected.

Report Start Step

1. Deletion: Clears all cost records whose document has been deleted, but whose cost record is suspended and not deleted. Depending on the XML setting, "Delete all costs on deletion" - If set to Yes, deletes all costs. If "No" is selected, it only deletes document-independent suspended costs.
2. Creating from Document: When the document that creates a retrospective cost record is entered or changes are made to the documents, it regenerates the weighted average costs of the documents according to their dates and rearranges the costs according to the weighted average method.
3. Creating from Production: It deletes the production costs between the selected dates and regenerates the costs arising from the relevant production result according to the production result date.

Case Study

Let's examine re-cost on an example case.

Let's make retrospective transactions on the documents belonging to this product, whose costs are formed in the linear date range, and mix the weighted average calculations. Let's make changes to a purchase invoice with a past date, additional costs to the documents that have been created, prices and quantities on the document.

Due to ordinary situations that may occur in business life, we have made changes on the documents that make up our cost records. As a result of the changes we made in our linearly progressing cost records, our weight inventory calculations were confused. In this case, let's correct our cost records by creating a cost again.

It was determined that there were 8 documents between the specified dates and the cost records of these documents were deleted.

After the costs of the detected documents were deleted in the first step, the weighted average calculation according to the document dates was re-run. In this case, let's compare the cost records of the product.

The area marked in red shows the initial cost records, the area marked in yellow shows the costs incurred after the cost is run again. Costs marked in yellow show accurate and up-to-date reconstructed costs.

If a sales invoice is issued for this product, the product will be issued at the last cost dated 15/09/2020. Accurate tracking of product costs ensures that your profitability reports yield accurate results.

Attention

Delivery notes that make costing, inventory receipts, inter warehouse packing receipts create costs for each product. These costs are moved from the final cost of the product at the exit location to the entry location.

The costs of the imported products are created on the "Imported Goods Incoming Delivery Note". The Additional Cost on the Import Invoice is carried over to the Import Goods Receipt.

In order to track inventory costs accurately, rerun costs at regular intervals. When issuing the stock opening receipt, the final cost will appear on the basket line and will be moved to the location you sent it. You can follow the stock costs in detail in the "Stock Analysis Report".