How are BOMs costed?

How are BOMs costed?

The Cost Rollup calculates a total estimated cost for the BOM parent. Each purchased component has an estimated cost from inventory. Each work center is given hourly rates for setup, labor, and manufacturing overhead which get applied to each routing sequence. Estimated costs for subcontract services are maintained in routing sequences. The Cost Rollup calculates all these costs up through all the subassemblies in the product structure to arrive at the total estimated cost for the BOM parent.


If the BOM includes secondary outputs, a portion of the parent item’s cost is allocated to each output on a percentage basis.

What is the BOM estimated cost used for?

BOM estimated costs are helpful for product pricing decisions. You also benefit by continuous monitoring of work center hourly rates, which keeps you in touch with your item labor and overhead costs.

Is the BOM estimated cost compared to actual job cost?

Not directly. When the job gets created from the parent item’s BOM, the program calculates an estimated job cost. If you modify the job’s BOM specifications, the estimated job cost gets changed accordingly. It is the estimated job cost that gets compared to actual job cost. 


Vivienne @ www.mrp.com.my