the results of cost calculation of the products in the month from "setup of
product cost". In addition, the transfer-in cost of the production transfer-in
form and the outsourcing purchase/return form in the inventory system will
also be updated with the calculated actual production cost.
This system also provides cost allocation of co-product for high-output
industries. Namely, products are not known when the work order is issued
and can be know only when the production is finished. When allocated to the
product, the materials, labor and expenses input for this work order can be
allocated equally by according to the quantity or calculated in accordance
with the proportion.
V. Precautions for calculation of production cost
To ensure correct calculation of product costs, extra attention shall be paid to
the following:
* Low level code
Since the manufacturing of a final product may be done level by level in a
multi-level mode, upon calculation of the production cost, it is necessary to
calculate the production cost of the bottom level first so that the production
cost of the high level items can be calculated one by one. The levels of the
items are judged based on "low level codes" in basic data of item numbers.
Hence, before performing the production cost operation, make sure that the
low level codes of the items are correct. The low level codes can be
calculated and updated automatically through "calculation and update of low
level codes" in the "product structure management system".
* Related systems
This system cannot operate independently; it should be introduced only after
the "manufacturing/outsourcing management system" and "inventory
management system" enter into operation successfully and normally. Since
the data relating to production transfer-in and requisition must be captured
from the manufacturing order system, if the document data of the
manufacturing order system are incomplete or the inventory cost data of the
inventory system are incorrect, the production cost calculated may not be
accurate.
* WIP equivalent unit
Considering the reasonableness of the cost, the equivalent unit of the WIP
manufacturing order at the end of the month must be included in the
consideration of cost calculation and is generally calculated by means of
rough estimate. As to the calculation method, this system provides the
following methods of flexible combinations of materials, labor and