Does anyone know of a flow chart on how the various cost drivers are allocated to parts and processes?
Not sure what you mean buy “cost drivers”. There are Transaction Hierarchy documents showing how GL accounts are debited/credited for each transaction type; there are several Cost Methods (Standard/Average/FIFO/etc.) that are assigned at the Part (or Part Site) level; and cost “buckets” (material/labor/burden/etc.) to analyze.
My upper management team is asking me to Develop a flow chart on how various cost drivers are allocated to parts and processes. So a cost driver would be anything that adds cost to a part such as labor and material. My thoughts are when an item is purchased and received then cost are assigned to that qty. When a job is completed (make to stock) once the material is issued and the job is completed, labor and material would be assigned to that qty on that part. I am new to all of this so just trying to understand what it all means
Yummy. There is a 300+ page Job Costing Technical Reference Manual (downloadable from EpicWeb) that has all the gory details, and probably even a flow chart you can copy/paste/modify…
BUT the Cliff Notes version is that each part has 5 cost buckets (what you call drivers, Epicor calls buckets) that are summed to give a Total Unit Cost: Material, Labor, Burden, Subcontract, and Material Burden. Purchased parts typically use just Material cost, while Manufactured parts typically use Material, Labor, Burden, and Subcontract. The final one, Material Burden, is sort of a “user defined” additional cost bucket.
The Cost Method you select for a part then determines how the inventory value is calculated. If you are on Standard cost, then the inventory unit cost is the Standard cost value and the difference between the Standard cost and the sum of the above buckets goes to a Variance account. If you are on Average cost, then the current inventory unit cost and the sum of the above buckets are combined using a weighted average to come up with a new inventory unit cost. Lot Average works the same as Average but at a Part Lot level. FIFO… let’s not go there unless you REALLY need to.
Let me know what kind of a can of worms we’ve waded into here!
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Thank you for all your input. I will look into that manual for sure. Yes, we use average on all parts as well. This has been very helpful