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Design Details: Cost Components

Cost components are different types of costs that make up the value of an inventory increase or decrease.

The following table shows the different cost components and any subordinate cost components that they consist of.

Cost Component Subordinate Cost Component Description
Direct cost Unit cost (direct purchase price) Cost that can be traced to a cost object.
Direct cost Freight cost (item charge) Cost that can be traced to a cost object.
Direct cost Insurance cost (item charge) Cost that can be traced to a cost object.
Indirect cost Cost that cannot be traced to a cost object.
Variance Purchase variance The difference between actual and standard costs, which is only posted for items using the Standard costing method.
Variance Material variance The difference between actual and standard costs, which is only posted for items using the Standard costing method.
Variance Capacity variance The difference between actual and standard costs, which is only posted for items using the Standard costing method.
Variance Subcontracted variance The difference between actual and standard costs, which is only posted for items using the Standard costing method.
Variance Capacity overhead variance The difference between actual and standard costs, which is only posted for items using the Standard costing method.
Variance Manufacturing overhead variance The difference between actual and standard costs, which is only posted for items using the Standard costing method.
Revaluation A depreciation or appreciation of the current inventory value.
Rounding Residuals caused by the way in which valuation of inventory decreases are calculated.

Note

Freight and insurance costs are item charges that can be added to an item’s cost at any time. When you run the Adjust Cost - Item Entries batch job, the value of any related inventory decreases are updated accordingly.

See Also

Design Details: Inventory Costing
Design Details: Variance Managing Inventory Costs
Finance
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