Item cost

MRPeasy keeps track of the actual cost of inventory, but it can also estimate the costs of items that are currently not in stock.

Jump to:

1. An item's cost at Stock -> Items.
2. Item cost in MRPeasy - actual/real versus estimated costs.
3. Booking and consumption of inventory.
4. Entering initial inventory values.
5. Inventory balance and stock movements.

Item's cost at Stock -> Items

The Cost column at Stock -> Items shows either:

1. the actual/real cost if the item is in stock,
2. or if it is not in stock, a rough estimation, of how much the item could cost.
   • For getting a more accurate estimate,
     • please use the Estimate costs and dates functionality,
     • or even better, create a new MO with real batch quantities.
   • Sometimes the cost cannot be estimated.

To check how an item's cost at Stock -> Items table is calculated, click on the cost of an item in the Cost column.

Item cost in MRPeasy

The following terms are in use when referring to the cost of a single unit of an item (in the order of decreasing accuracy):

1. Actual cost / real cost. 
   1. Weighed average cost.
   2. Approximated cost.
2. Estimated cost.

Actual cost, real cost

The actual cost refers to the inventory cost - i.e. the real cost of individual units of items in inventory.

• The actual cost of a single unit of an item is taken from its stock lot.
  • For purchased items, based on the source Purchase Order, it is the price paid for it, plus any additional fees. 
  • For manufactured items, based on the source Manufacturing Order, it is the total manufacturing cost. (Before the MO (or PO) is finished and accurately reported, the stock lot exists, but its cost can be considered an estimation only.)
  • When manually entering stock lots, e.g. when entering initial inventory levels, the user must define the actual cost. The cost can be later modified in the stock lot.
  • When making an inventory adjustment, the system may try to determine the cost of the new stock lot automatically. The cost can be later modified in the stock lot.
• The accuracy of the inventory cost relies completely on the accuracy of data entry.

The actual cost is used:

• For the cost calculation (or, initially, estimation):
  • When items have been booked, e.g. materials are reserved for a Manufacturing Order or products for a Customer Order.
  • When using the Estimate costs and dates function in a Customer Order and an item is in stock (or expected) and available.
• When inventory increases:
  • Purchased items are received.
  • Manufacturing is finished, and finished products are added to stock.
  • Inventory levels are manually increased.
• When inventory decreases:
  • Goods are picked from stock for shipment.
  • Materials are consumed in manufacturing.
  • Inventory levels are manually decreased.

Weighted average cost

The weighted average cost refers to the average actual cost of the items that are in stock currently.

The weighted average cost is calculated based on the actual cost of the in-stock items.

The weighted average cost is used:

• At Stock -> Items for items that are in stock.
• At Stock -> Inventory.
• During BOM cost estimation if a material is in stock.

Approximated cost

The approximated cost refers to using the actual cost from the stock lots of a part as a basis for a product's cost estimation.

When a BOM cost is estimated:

• The cost of a material - if it is in stock - is approximated according to the weighted average cost (instead of using FIFO or FEFO).

When estimating costs for a CO:

• The cost of an item - if it is available, either in stock or expected - is approximated according to the actual cost of the stock lot(s) (using FIFO or FEFO, according to the required quantity in CO).
• If more items are required than available, the estimated cost is used for the remainder.

Estimated cost

The estimated cost refers to a rough estimation of cost for an item that is currently not in stock. E.g. a part that should be procured, or a product that should be manufactured.

For purchased items:

• The estimated cost is the price of the highest priority purchase term.
• When there are several purchase terms with the same priority, the lowest price is used.

For manufactured items:

• For getting a more accurate estimate,
  • please use the Estimate costs and dates functionality,
  • or even better, create a new MO with real batch quantities.
• The Stock -> Items -> Cost column gives a very rough estimate, by summing the estimated cost of the Bill of Materials and the Routing.
  • Read about BOM cost estimation.
  • The routing cost is calculated as the sum of all costs defined in the routing.

Cost estimations cannot be calculated in some cases

1. If there is missing data. 
   • A procured item does not have purchase terms.
   • A manufactured item does not have a BOM and routing.
   • The cost of a BOM cannot be estimated. For example, because a part's cost cannot be estimated.
2. For all manufactured items at once, and displayed at Stock -> Items:
   • If Matrix BOM is used in them.
   • If there are more than 1000 BOMs or routings.
   • In such cases, use the Estimate costs and dates functionality or create a new MO to estimate the cost.

When an item or a BOM is opened and saved, then MRPeasy tries to estimate its cost.

So, you may try opening the item or its BOM, which cost is not displayed, and clicking Save to make the system re-calculate the cost (assuming all information is now available).