Calculate Costs

Determine the true cost of manufacturing a batch or unit—factoring in actual material consumption, labor, machine usage, and overhead—so you can compare estimated versus actual spending and optimize your margins in the CGIC App.

What it does

• Captures actual raw material consumption, operation (labor/machine) usage, and any scrap or process losses recorded during production
• Rolls up these actual costs and compares them to the original BOM estimates
• Provides detailed breakdowns at the Work Order and batch level (e.g., cost per unit, cost variance)
• Helps identify cost overruns, inefficiencies, and areas for process improvement

Prerequisites

• You have one or more Work Orders that have been fully Submitted and Completed under Manufacturing > Work Order > Work Order List.
  • Actual raw material usage has been recorded via Stock Entries (Material Issue) or Delivery Notes for finished goods.
  • Operation times (labor or machine hours) have been tracked on Work Orders or via time‐capture entries.
• Any fixed or variable overhead (utilities, facility rent, packaging) has been defined either:
  • In a custom field on the BOM/Work Order, or
  • Via an overhead rate in the Cost Center settings under Accounts > Cost Center.

1.0 Record Actual Material and Labor Consumption

1. Material Issues
   • When you complete a production run, create a Stock Entry > New Stock Entry with Purpose = Material Issue (or use Delivery Note if you are directly shipping finished goods).
   • In the Items grid, for each raw material:
     • Item Code: scan or type the component.
     • Qty: enter the actual quantity consumed (e.g., 52 kg of Flour vs. 50 kg estimated).
     • Source Warehouse / Bin: confirm location.
     • If batch/serial tracked, assign Batch No. or Serial No..
   • Click Save, then Submit to post the ledger entry, deducting inventory and capturing actual cost at the purchase‐rate.
2. Operation Times / Labor Capture
   • On a Work Order > Work Order List, open the completed Work Order record.
   • In the Operations section, ensure each step has logged:
     • Actual Time Spent (minutes or hours logged by operators or supervisors).
     • Workstation (machine or labor station) used.
     • If you track hourly rates per workstation, these rates should be set under Manufacturing > Workstation > Workstation List.
   • If your organization uses a separate time‐capture tool, import or manually enter actual operation times into these fields, then click Save, Submit (if not already).

1.1 Run the Production Costing Report

1. Navigate to Manufacturing > Reports > Production Costing Report.
2. In the filter panel, set:
   • Work Order: select the completed Work Order you want to analyze.
   • Company: choose your legal entity.
   • Include Estimates (toggle): if you want to compare estimated (BOM) vs. actual costs side‐by‐side.
   • Date Range (optional): to group multiple work orders into a single report.
3. Click Refresh (or Run). The report displays:
   • Raw Material Estimated Cost (from BOM) vs. Actual Material Cost (from issued stock at purchase rates).
   • Operation Estimated Cost (BOM operation rates × planned time) vs. Actual Operation Cost (actual time × workstation rate).
   • Overhead Cost (if defined) and whether actual overhead matches what was allocated.
   • Total Estimated Cost, Total Actual Cost, and Cost Variance (difference).
   • Cost per Unit Estimated vs. Cost per Unit Actual.
4. Review each component to see where variances occurred (e.g., raw material overconsumption, extra labor hours, scrap).

1.2 Investigate and Adjust BOMs or Processes

1. In the Production Costing Report, click on any row (e.g., a raw material line with variance) to drill into detailed transactions:
   • For raw materials, it opens the Stock Ledger filtered to that Work Order’s material issues, showing purchase rates and batch details.
   • For operations, it opens the Work Order’s Operation Log, displaying actual start/end times.
2. Identify root causes for variances:
   • Material Overuse: check if wastage or scrap was higher than expected—inspect Scrap & Process Loss in that BOM.
   • Labor Overrun: verify if machine downtime, rework, or operator skill impacted actual time.
   • Rate Discrepancies: ensure purchase rates used match negotiated supplier prices; update item master if rates have changed.
3. If a BOM requires adjustment (e.g., refine quantity of raw material or operation time), update the BOM and create a new revision under Manufacturing > Bill of Materials > BOM List, then re‐estimate for future work orders.

1.3 Aggregate Multiple Work Orders for Periodic Cost Analysis

1. To view costs across multiple orders, set filters in the Production Costing Report:
   • From Date / To Date: e.g., last month or last quarter.
   • Production Item: filter by a specific product or product family.
   • Workstation: compare costs across machines.
2. Click Refresh. The report aggregates:
   • Total Estimated Material Cost vs. Actual Material Cost for all selected orders.
   • Total Estimated Operation Cost vs. Actual Operation Cost.
   • Combined Cost Variance and Overall Batch/Unit Cost.
3. Export the summary to CSV or PDF for use in budgeting, variance analysis, and management review.