Replacement Cost represents what it should cost to purchase or make an item today. The replacement cost is used by the purchasing dept to compare the negotiated price to the current market. The sales dept uses replacement cost as a guide to determine customer pricing.
There are 3 calculations to determine Replacement Cost:
- ‘B’uy sku’s replacement cost is calculated using the Base Cost (+/-) the current week’s
Market index per lb defined by the replacement cost code assigned to the item.
- ‘SP’ecial sku’s replacement cost is entered manually when the sku is created and again when if it is reviewed for subsequent sales orders.
- ‘M’ake sku or any sku that is not a ‘B’uy . Its replacement cost is calculated by adding up the
defined raw material’s current replacement cost plus labor and outside/other processing charges.
Average Cost is the current average cost of the inventory. This is the cost that will be used when relieving inventory. If receiving a Purchase Order the received cost equals the cost entered on the Purchase Order plus the Load’s freight cost per lb. This cost is then averaged with any current inventory and a new average cost is established. If a Production Ticket is posted, the received cost is the current bom cost. This cost is then averaged with any current inventory.
Base Cost is the standard cost at the Replacement Cost starting point (Jan 2012) for items that existed at that time . Now when an item is created the user will enter the raw std cost. When the item goes through its first cost roll the base cost will be calculated. To determine the base cost, the program will take the RSC cost and (+/-) the current weeks market per lb adjustment to take the base cost back to the Jan 2012 starting point. At this point in time the replacement cost and the RSC cost should be the same.
BOM Cost is the total cost to produce an item. It is the bottom line on the ‘SC’ screen. It includes the raw material’s current average cost, labor and outside/other processing charges. A production ticket is received in at BOM cost and is then averaged with any existing inventory.
RSC (Raw Standard Cost) is the landed cost a ‘B’uy should cost at the time the product is created.
Notes:
Special costing at Lancaster – BOM cost is captured at time sales order is printed and cut ticket is created. When sales order is invoiced if there is a difference between BOM captured cost and dollars relieved from inventory, it is posted as an adjustment to Inventory and Inventory cycle count adjustment.
4/27/16 When receiving ticket with a pm.cm.hist record,the raw material and packaging costs will be swapped out with today’s average cost.