Standard Cost: Itemization and Multilevel CCS
I create this post in order to explain the concept of Multilevel CCS because our friend Rajneesh Saxena requested in this thread.
1. Create FERT, BOM and Routing. Simple one, just 1 component (a halb material) and 1 operation.
In the routing, we use 1 hour of Machine for KG
2. Create HALB, BOM and Routing. Simple again. Just 1 material, a RAW.
In order to produce 1 KG we use 2 hours of the same work center. Its a fool example but give the concept.
3. Run CK11N to the FERT. The system do multilevel explosion. When I say multilevel, i mean explode al the componentes in all level, including transportation between plants and its aditional costs.
The Standard of the fert is 3978.10 = activity ( 1 hour = 1322) + 1kg of halb (2655)
In order be more specific, in the FERT we see the HALB material cost of 2655. We see the full value because the Itemization is not multilevel. But later, we are going to see this value split in RAW and Activities in the multilevel CCS.
Now check the HALB. To produce 1KG, i need 1 kg or raw material (10$) + 2 hours of Activity 2*1322 = 2645
Ok. Here we see something, the Itemization is Single Level. In the Level of the FERT, we se its components, and in the level of the HALB, we see its componentes.
Now see the CCS of the HALB. At a 1st glance, we see it match with its Itemization. This is because this halb is the Lower Level of the multilevel itemization process.
Now check the Itemization of the FERT. Here we see very clear the multilevel stuff
Raw Materials: We see here the 10$ used to produce the HALB material
Production: 3968 = 2 horus to produce the HALB + 1 Hour to produce the FERT = 3 * 1322 = 3966
The cost of the fert is 3978 is the same in the Itemization and in the CCS!
Wish this clarify the multilevel concept!
PS. I create the example very fast (25 minutes), so i made the mistake of set the Machine hours in the CCS 20 Labor/Setup, but i dont worry about it.