Product Costing

If you've been operating in the dark, not knowing what it really costs to make your products, DBA will shed the light on your manufacturing costs. DBA provides all the costing tools you need to achieve more accurate inventory values and costs of goods sold, to gauge the impact of manufacturing overhead on gross margins, to assess the relative profitability of products, and to make better pricing and quoting decisions.

Estimated Costs

Costing Decimal Places - Manufacturing companies need more decimal places for costing and pricing than other businesses, especially when small parts like washers, o-rings, springs, and fasteners are involved. In the Inventory Defaults screen you can specify the number of decimal places you need for costing purposes.

Last Cost, Inventory Cost, Estimated Cost - Three unit costs are maintained against each stock item in the Stock Items screen. The Last Cost is the last PO or job receipt cost. The Inventory Cost is an average cost that gets updated with each PO or job receipt. The Estimated Cost is what you would expect the item to cost the next time it is purchased or manufactured.

Estimated Purchase Costs - Estimated costs for purchased items are periodically updated in the Estimated Purchase Costs screen. You can populate the screen with a single item or items pertaining to one or selected item categories or to all items in all categories. You can enter a new Estimated Cost or you can perform a mass update where each listed item's Estimated Cost is updated by the item's Last Cost or Inventory Cost.

Subcontract Costs - Estimated costs for subcontract services such as painting, plating, and heat-treating are entered directly against subcontract routing sequences in the Routing tab of the Bills of Material screen. You can enter the supplier price, as well as a conversion multiplier in cases where the service is priced in a different unit of measure than the item's unit of measure.

Setup Cost, Labor Cost, Manufacturing Overhead Cost - For manufactured items, setup, labor, and manufacturing overhead costs are calculated from each routing sequence's setup hours and cycle time, using hourly rates stored against the sequence work center. Hourly rates are maintained in the Work Centers screen.

Factored Hourly Rates - Instead of entering hourly rates directly, they are derived from an overall shop labor rate and an overall shop overhead rate (see next). Within each work center, the shop rates can be factored up or down. For example, if you feel that the setup rate should be 50% higher than the labor rate, perhaps because setup personnel are higher paid than direct labor workers, you can enter a factor of 1.5. If you feel that the labor rate should be higher or lower than the shop average, factor the labor rate up or down. In the case of manufacturing overhead, if you feel a work center has a disproportionately higher share of the overhead burden, perhaps because it is a complex machine that consumes extra energy and maintenance, you can factor the rate accordingly.

Shop Rates - The Shop Rates screen is used to calculate an overall shop rate for direct labor and an overall shop rate for manufacturing overhead. These shop rates provide the basis for your work center hourly rates. First you enter a date range and then, using information from your accounting system's general ledger or from your payroll system, you enter the total cost for direct labor for this date range and your total cost for manufacturing overhead. The program divides both of these costs by your actual labor hours for the same data range to arrive at an overall shop rate for direct labor and an overall shop rate for manufacturing overhead.

Cost Rollup - For manufactured items, the Cost Rollup screen blends all the previously reviewed cost inputs - purchased item costs, subcontract service costs, work center hourly rates, into a total estimated cost, rolled up through all levels of each item's product structure. The cost rollup has no direct accounting effect and can be run as often as you wish.

Quoting and Pricing

Quotes - Quotes are used to send customers prices prior to receiving a confirmed order. Within the Quotes screen, 'one-off' items can be generated for custom manufactured products. After a one-off item is generated, it can be given a bill of material, either by copying an existing bill of material and editing it or by entering a bill of material from scratch. Once the bill of material is finished, you can perform a cost rollup to get an estimated unit cost for the item against which can be applied an appropriate margin to establish the quoted price.

Base Price Mass Update - For standard products, the Estimated Cost can be used to help establish Base Prices, which are your selling prices or the basis for your price level prices. In the Base Prices screen, you can perform a mass update by applying a percentage increase or desired profit margin to each item's Estimated Cost.

Job Costing

Estimated Job Costs - When MRP generates a job, the job details are originated from the parent item's bill of material. When the job gets initially created or modified, an estimated cost is calculated, broken out into these cost classes - setup, labor, material, subcontract, and manufacturing overhead.

Actual Job Costs - Actual job costs accumulate during the course of the job. When the job is finished, you can compare estimated versus actual job costs, which provides feedback that can be used to adjust cycle times and other cost inputs to refine the item's Estimated Cost.

Finished Item Cost Basis - In the Job Defaults screen you have the option of receiving finished items at estimated job cost or actual job cost. In general, if you have standardized products, the estimated job cost basis is recommended because it gives you a variance at time of job close that can be used as a feedback mechanism. If you have highly customized products, the actual job cost method is appropriate. The final receipt cost exactly balances input and output costs with no variance.

Job Receipt Costs - Finished items are received to stock in the Job Receipts screen. The unit cost of each receipt is calculated by the program at the estimated job cost or actual job cost basis (see previous). This receipt cost is averaged with the cost of any stock on hand to establish a new Inventory Cost for the item. The Inventory Cost is the unit cost applied when the item is issued as a subassembly to other jobs or it is the cost of goods sold when the item is sold to customers.