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Setting Up Costing Sheet For BOM in

DYNAMICS 365 For Finance and Operations

Nabarun Saha - Dynamics 365 For Finance & Operations

1. Segregate and list down the Direct Cost (Purchase / Manufacturing) cost and the Indirect Cost (Over
2. The Overhead cost can be for both Material and Production.
3. List down the Subtype for Over Head Cost (Level/ Sub Level/ Total)
4. List down the costing version that will be associated for overhead calculation of purchase / procured
items, SITE, List of Items / Group of items and the percentage of overhead will be associated.
5. List down the Ledger posting GL Accounts for:
a. Estimated indirect cost absorbed (ACCOUNTS – PHYSICAL)
b. Indirect cost absorbed (ACCOUNTS – FINANCIAL)
c. Estimate cost of Manufacturing, WIP (ACCOUNTS – PHYSICAL)
d. Cost Of Manufacturing Consumed, WIP (ACCOUNTS – FINANCIAL)
6. List down the Financial Dimensions for the specific posting (If Any):
a. Business Unit
b. Cost Centre
c. Department
d. Item Group
e. Project
1. Go to Cost Management > Manufacturing Accounting Policies Setup
2. Setup the Production Control Parameters for Costing:

3. Create a Costing Version: Cost Management > Predetermined Cost Policies Setup > Costing
a. Select the costing type (Planned / Standard / Conversion).
b. Fill in the other details like Version, Name
c. Select ‘No’ for Block Activation

4. Create the Cost Groups: Cost Management > Inventory Accounting Policies Setup > Cost Groups
You can select/Tag/View:
a. Cost Groups in the Cost Categories from the Direct Manufacturing Cost Groups / Outsourced
b. Items from the Direct Material Cost
c. Related Indirect Cost Nodes from Indirect Cost Groups
d. Posting GL Accounts from the ‘Posting’ options in each Cost Groups
e. For each Cost group you can setup different profit setting to arrive at Tentative COGS.
Direct Manufacturing Cost Group (Production)

Direct Material (Purchased – Raw Material) – Internal Consumption

Direct Material (Purchased – Raw Material) – External bought-outs

Outsourced Cost Group

Overhead Cost Group

5. Create the Shared Categories and Cost Categories: Cost Management > Manufacturing
Accounting Policies Setup > Shared Categories / Cost Categories

Shared Category:
Example of Shared Category (Used in Project & Expense with Subcategories)

a. For creation of Cost Categories > Necessarily you have to create the category in Shared Category
b. The ‘Usage’ of the category need to be necessarily tagged with ‘Yes’

Shared Category with Production Usage Tagged

Cost Category:
Fill in:
a. Category ID: Same as Shared Category
b. Category Name
c. You can select the Usage as ‘Use in Project’ to be ‘Yes’ provided the Shared category is already tagged
with the same

Cost Category – Usage

Select in Production Fast Tab:
a. Cost Group
b. The Category ID will be automatically filled in

Production Fast Tab in Cost Category

Select from the Ledger Posting Fast Tab:

a. Estimated and actual cost ledger for Manufacturing
b. Estimated and actual cost for WIP

6. Create the Calculation Groups: Cost Management > Predetermined Cost Policies Setup >
Calculation Groups
Fill In:
a. Calculation Group ID and Name
b. Select the appropriate Cost price model, Alternate Cost Price Model, Sales Price Model
c. Select ‘Yes’ in Stop Explosion if you do not want to Explode
d. Select the Warning levels

7. Create the Cost Sheet: Cost Management > Indirect Cost Accounting Policies Setup / Ledger
Integration Policies Setup:
The setup can be a combination of:
a. Direct Cost: Comprising of
1. Purchase Material Cost
2. Stock material Cost
b. Outsourced Cost
c. Production Cost
d. Overhead cost based on each level above
So, based on the above the following can be made as:

Cost Of manufacturing
Direct Cost - Material
Direct Stocked Material Cost
Direct Purchase Material Cost
Direct Cost-Production
Direct Cost–Production
Steps: Direct Cost-Outbound
i. Follow the path: CostDirect
Management > Indirect Cost Accounting Policies Setup/Ledger Integration
Policies SetupIndirect
> Costing Sheets
Overhead Cost-Stocked Material
Overhead Cost-Purchase Material
Overhead Cost-Production
Overhead Cost-Offloading

ii. Click on Root Node

iii. Click on New to create
iv. Select the Node type as ‘Total’
v. Give the Code as ‘Cost-Manufac’
vi. Give the Description as ‘Cost Of Manufacturing’

vii. Set the Setup Header to ‘Yes’ and Setup Total to ‘Yes’
viii. Now we need to create a Cost Group as ‘Direct Cost – Material’.
ix. Click on the above node and click on ‘New’
x. Select the node type as ‘Total’
xi. Give the code as ‘Direct Cost-Mat’
xii. Give the Description as ‘Direct Cost – Material’

xiii. Now standing on Direct Cost Material, click on new.

xiv. Fill in the node type as ‘Cost Group’
xv. Fill in the code as ‘Direct-Stock-Mat’
xvi. Fill in the Description as ‘Direct Stocked Material Group’

xvii. Correct the Code as ‘Direct-Stock-Mat’

xviii. Select the cost group as ‘Internal Sourcing’
xix. Check the cost group type as ‘Direct Material’
xx. Repeat the steps from xiii – xix to create the cost group ‘Direct Purchase Material Group’

xxi. Repeat the steps from viii – xix to create the Production group
xxii. Repeat the steps from viii – xix to create the Outsourced (Outbound) cost group
xxiii. Now we need create the Indirect Cost Group
xxiv. For the Total Header, follow the steps from viii – xii.

xxv. Now under the Overhead Total group we need to create four different type of overhead cost as
xxvi. For creation of Overhead on the material (both internal and External) the NODE Type will be
Surcharge and for the overhead on Production or Offloading we can use the NODE Type as
xxvii. Create a cost group as ‘Over-Head-Stocked Material’
xxviii. Now we need to add a calculation group for each overhead.
xxix. Standing on the newly added cost group click on new
xxx. Select Surcharge in the node type (As we are configuring the overhead for material).
xxxi. Fill in the appropriate Code and Description.

xxxii. For each calculation sheet, we need to fill in certain details in the fast tabs.
xxxiii. General Fast Tab:
a. Check the Subtype
b. Change the ‘Per Item’ to Yes if we want to apply per item basis or on overall cost

xxxiv. Absorption Basis Fast Tab:

a. Select the appropriate level on which the calculation will be done from the cost sheet
hierarchy. We need to be extra careful at this stage, so that the correct calculation is done
b. Select the subtype also over here

xxxv. Surcharge Fast Tab:

a. Select the respective Costing Version created earlier
b. Select if the Surcharge is applicable for specific SITE
c. You can also mention the percentage over here. This percentage will be used while
calculating the surcharge.
d. You need to activate the costing version.
xxxvi. Ledger Posting Fast Tab:
a. Select the appropriate GL in the Ledger posting for the estimated and actual value posting
of the surcharge

xxxvii. Financial Dimensions Fast Tab:

a. Select the specific Financial Dimensions like Business Unit, Cost Centre, Department etc. if
the posting is required specific to the cost center.

xxxviii. Repeat the steps from xxviii – xxxvii to create:

a. Over Head for Purchased Material
xxxix. Now we need to create the group for Overhead of Production
xl. Create the cost group for Over Head of Production

xli. Under the above cost group, create the calculation group
xlii. Select the node type as Unit Based

xliii. Under General Fast Tab -> Sub type can be selected either Quantity / Weight / Volume, depending
on the calculation methodology that is going to be followed.
xliv. Select the correct Absorption basis (note that in this case you do not need to mention the subtype
in absorption)

xlv. Under the RATE fast tab select the Version and give the specific amount that you want to mention
(If Any)

xlvi. Give the specific Ledger Heads for posting of Estimated and actual vales for the overhead of

xlvii. Select the respective Financial Dimensions if any

xlviii. Follow the steps from xxxix – xlvii for creation of the overhead group for Offloading
xlix. Now we need to test the cost sheet