Standard Cost Calculation Principles

The calculation of the costs of the manufactured items requires several steps, as shown in the following diagram.

From the budgets decided by the company (which are not managed in Prelude), the user carries out a decomposition of the costs among the cost centers and then one assigns them to a cost category (seized in the budget lines).

The user enters the standard number of working hours corresponding to each cost center. The corresponding hourly rates are then computed for each type of cost.

The work centers which belong to a given cost center have the hourly rates corresponding to this cost center.

For the subcontracting work centers (which correspond to a particular subcontractor), the user enters the hourly rate directly.

For each routing operation, one determines the fixed and variable costs. The fixed costs correspond to fixed setup machine and labor times, while the variable costs correspond to run times.

One enters the purchase prices of the purchased items. Via the BOM, one determines the material cost for each manufactured item.

One enters the rates for overhead to include in the different cost categories (purchase cost, machine cost, labor cost).

Several valuation options can be selected in the Item cost rollup.

The costs of the manufactured items are structured by type of cost.