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Introduction
The objective of this Hand-on Lab (HOL) is to explore, at your own pace, the
principles and set up required for standard costing in Microsoft Dynamics® AX
2012. This HOL highlights the following topics.
Note that hands-on labs for the Inventory Costing and Valuation in Microsoft
Dynamics AX 2012 contain dependencies, which means that some data that you
set up or create in one lab can be used in other labs. Therefore, it is recommended
that you perform all six labs on a single virtual machine (VM) in a sequential
order. You can download the VM with Microsoft Dynamics AX 2012 using the
following link:
https://mbs.microsoft.com/partnersource/deployment/methodology/vpc/ax2012de
motoolsmaterials.htm?printpage=false&sid=va2ynauztj1yuvhufnfo34in&stext=a
x%202012%20virtual%20machine
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Hands-on Lab Costing and Inventory Valuation in
Microsoft Dynamics® AX 2012
Account: Administrator
Password: pass@word1 (mailto:pass@word1)
Prerequisite Knowledge
To successfully complete this HOL, you will need to have an understanding of
how to use the principles and mechanisms from cost management in Microsoft
Dynamics AX 2012. Additionally, you must have a general understanding of the
basic inventory accounting principles and the underlying inventory costing
methods, and valuation principles.
Ken, the Controller, has decided that items costs and variances for subcontracted
items should be categorized separately from other raw material and manufactured
items. So, Ken has created new main accounts that will be used for posting these
types of items. Now Ken must work with Vince, the Operations Manager, to
create a new cost group, assign them to the products and resources, and configure
the system to post variances by cost groups.
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Chapter 3: Hands-On Lab: Standard Costing
TIP: You must turn on the Bill of materials > Allow cost breakdown activation
configuration key in the License configuration form to use this feature.
1. Open Inventory and warehouse management > Setup > Costing >
Cost groups.
2. Click New to create a new record.
3. Type "SContract" in the Cost group field.
4. Type "Variable Subcontract Costs" in the Name field.
5. Select Direct outsourcing in the Cost group type field.
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Hands-on Lab Costing and Inventory Valuation in
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To create a new main account that will be used for subcontracting variances,
follow these steps.
1. Open Inventory and warehouse management > Setup > Costing >
Cost groups.
2. Select the SContract cost group that you created in Exercise 2:
Create a Cost Group, and then click Posting.
3. In the Posting form, click Purchase price variance on the left pane.
4. Click Add in the grid on the right pane.
5. In the Main account field, select 510305.
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6. Click Production lot size variance on the left pane, and then repeat
steps 4 and 5.
7. Click Production price variance on the left pane, and then repeat
steps 4 and 5.
8. Click Production quantity variance on the left pane, and then
repeat steps 4 and 5.
9. Click Production substitution variance on the left pane, and then
repeat steps 4 and 5.
10. Close the form.
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Hands-on Lab Costing and Inventory Valuation in
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1. Open Production control > Setup > Routes > Shared categories.
2. Click New to create a new record.
3. Type “SContract” in the Category ID field.
4. Type "Subcontracting” in the Category name field.
5. Select the Can be used in Production check box, and then close the
form.
6. Open Production control > Setup > Routes > Cost categories.
7. Click New to create a new line.
8. Select SContract in the Category ID field.
9. Click the Production FastTab, and then in the Cost group field,
select Service.
10. Click the Ledger - resources FastTab.
11. In the WIP account field, select the receipt account that will be
debited for operations resource consumption (such as 150200). This
account is used for WIP when you consume operations (in a route
card journal) on a production order.
12. In the WIP issue field, select the issue account that will be credited
for operations resource consumption (such as 600500). This account
is the offset to the WIP account field.
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Chapter 3: Hands-On Lab: Standard Costing
13. In the Resource issues field, select the issue account that will be
credited for operations resource absorption when you end a
production order (such as 600500).
14. In the Resource issues, offset account field, select the offset
account to be debited for resource issues when you end a production
order (such as 510240).
TIP: Steps 6 through 9 are only required when the Ledger posting field in the
Production control parameters form is set to Item and category.
NOTE: It is recommended that the accounts specified on a cost category are set
up to prevent manual entries. You can do this by selecting the Do no allow
manual entries on the Main accounts form.
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Hands-on Lab Costing and Inventory Valuation in
Microsoft Dynamics® AX 2012
1. Open Production control > Setup > Routes > Cost categories.
2. Select the SContract category that you created earlier.
3. Click Price.
4. In the Version field, select Standard.
5. Select Site 1.
6. Type "19.99" in the Price field.
7. Save the record, and then click Activate.
8. Close the form.
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Chapter 3: Hands-On Lab: Standard Costing
5. In the Run time category field, select the cost category that will be
used for run time operations.
6. In the Quantity category field, select the cost category that will be
used for the quantity of items produced.
7. Close the form.
TIP: On the Ledger FastTab you can specify the main accounts that will be used
to post the consumption. These fields are used when the Ledger posting field in
the Production control parameters form is set to Item and resource.
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Hands-on Lab Costing and Inventory Valuation in
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1. Open Inventory and warehouse management > Setup > Costing >
Costing versions.
2. Click New.
3. In the Costing type field, select Standard cost.
4. Type "2012Std" in the Version field.
5. Type "2012 Standard Costs" in the Name field.
6. Set the Block activation field to No.
7. Click the Recording tab.
8. Select the Cost price check box.
9. Close the Costing version setup form.
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Chapter 3: Hands-On Lab: Standard Costing
After you create a new costing version, you can enter the costs for the version.
The basic tasks you can complete include the following.
1. Enter purchase price records for purchased items and costs for
transferred items.
2. Enter cost records for cost categories that are associated with routing
operations.
3. Calculate cost records for purchased and manufactured items.
4. Change the status of cost records from pending to active.
5. Copy item cost records to a costing version.
The detailed steps for completing these tasks are included in the following
exercises.
Ken, the Controller, wants to run a calculation for manufactured items to know
how the changing purchase prices of raw materials is affecting the cost of
manufactured items. So, Ken decided to block the new costing version to prevent
the calculated prices from being activated.
1. Open Inventory and warehouse management > Setup > Costing >
Costing versions.
2. Select the costing version that you want to block. For example,
select Std_2007.
3. Optionally, set the Block field to No. so that, if necessary, new costs
can be created for the costing version.
4. Optionally, set the Block activation to Yes. This will prevent the
pending prices in the selected version from being activated.
5. Close the form.
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When the two-version approach is used, blocking policies for the original costing
version should be set up to prevent updates. Identical blocking policies should be
set up for the additional costing version, except for the specified from-date and
the selective use of blocking policies to allow for updates. The specified from-
date should be updated with each batch of changes to reflect the scheduled
activation date.
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TIP: Because this is a new item, the activation of the standard cost has no affect
on the inventory value. If the item has on-hand quantities, the system revalues the
inventory at the new standard cost and posts a transaction using the Inventory
cost revaluation account specified for the combination of item, inventory
dimensions, and cost groups in the Posting form on the Standard costs tab.
Item cost records can be selectively copied and changed to populate the copy-to
costing version. For example, you can change the cost records based on a factor
or amount, change the site to create cost records for another site, or change the
from-date to create cost records that apply to a future time period. The copied
cost records have a pending status, and costs for manufactured items must be
recalculated after you copy the cost records.
1. Open Inventory and warehouse management > Setup > Costing >
Costing versions.
2. Select the version that you want to copy from and then click Copy >
Copy item prices.
3. Select an option to copy from a specific version or from active
prices.
4. Select the version to copy the price to in the Copy to Version field.
5. Optionally, select the Change date field to update the copied records
with a new date.
a. In the Unit field, select to add Days, Months, or Years.
b. In the Change field, specify the number of Days, Months, or
Years to add.
6. Optionally, select the Change site check box, and then specify the
new site for the copied records in the Change field.
7. Optionally, use the Change in price field group to update the prices
by a factor or an amount.
8. Optionally, use the Change in charges field group to update the
charges by a factor or an amount.
9. Optionally, use the Select button to filter the records to be copied.
10. When you are ready, click OK. The selected prices will be copied.
TIP: Similar steps can be used to copy indirect cost and cost category prices.
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1. Open Inventory and warehouse management > Setup > Costing >
Costing versions.
2. In the Costing version setup form, select the record for the
Standard Cost Costing Version and then click Calculation.
3. In the Calculation for a costing version form, click the Site arrow
and select “1.”
4. Click Select.
5. Click the Criteria column and then type “1101, 1102”.
6. Click OK in the BOMCalc query form.
7. Click OK in the Calculation for a costing version form.
8. In the Costing version setup form, click Price > Item price.
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9. Select the record for item 1101 and then click Summary.
Notice that the line for the sales price for HESMat cost group is based on
the cost price plus the 50 percent profit margin markup. The calculation for Cost
group HESMat, Level 1 is as follows: 554.03* 50% = 277.015. Therefore, +
554.03+277.015= 831.045, which is the sales price for each unit.
NOTE: There are several ways to run a calculation. This exercise only examines
one method for running a calculation. For more information about calculations
groups and calculations refer to the Bill of Materials in Microsoft Dynamics AX
2012.
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Chapter 3: Hands-On Lab: Standard Costing
The starting point for using the tree structure is labeled the root node. This node
cannot be deleted or modified. All other nodes in the tree are created by right-
clicking on the parent node that you want to add the child node to and selecting
Create. You can drag cost groups from the Cost group FastTab into the tree
structure to help quickly build the layout.
When you add an indirect cost node, you must select the type of indirect cost that
will be created, and then configure the Calculation and Posting (selection of
main accounts for posting the indirect costs) tabs.
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1. Click the Company arrow in the breadcrumb bar, and then select
CEC.
2. Open Inventory and warehouse management > Setup > Costing >
Cost groups.
3. Click New to create a new record.
4. Type "MAT" in the Cost group field.
5. Type "Material Costs" in the Name field.
6. Select Direct materials in the Cost group type field.
7. Select Fixed cost in the Behavior field.
8. Click New to create a new record.
9. Type "LAB" in the Cost group field.
10. Type "Labor Costs" in the Name field.
11. Select Direct manufacturing in the Cost group type field.
12. Select Fixed cost in the Behavior field.
13. Click New to create a new record.
14. Type "IND" in the Cost group field.
15. Type "Indirect Costs" in the Name field.
16. Select Indirect in the Cost group type field.
17. Select Fixed cost in the Behavior field.
18. Close the form.
1. Open Inventory and warehouse management > Setup > Costing >
Costing versions.
2. Select the CUR1 costing version.
3. Set the Block field to No.
4. Close the form.
1. Click the Company arrow in the breadcrumb bar, and then select
CEC.
2. Open Inventory and warehouse management > Setup > Costing >
Costing sheets.
3. Right-click the Root node in the Costing sheet pane, and then select
Create.
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Chapter 3: Hands-On Lab: Standard Costing
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Hands-on Lab Costing and Inventory Valuation in
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7. Click and drag the cost groups for materials from the Cost groups
grid to the Material Cost - Total Material Cost node on the tree.
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Chapter 3: Hands-On Lab: Standard Costing
7. Click and drag the cost groups for labor from the Cost groups grid
to the Labor Cost - Total Labor Cost node on the tree.
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Hands-on Lab Costing and Inventory Valuation in
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7. Click and drag the cost groups for indirect cost from the Cost
groups grid to the Indirect Cost - Total Indirect Cost node on the
tree.
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NOTE: You can add the indirect cost prices to the Surcharge or Rate grid at the
bottom of the form. You can also use the Costing version form to add the indirect
costs.
Summary
Cost groups are classifications of cost contributed by resources. The cost group
types determine the nature of resources, which can be classified as Direct
material, Direct manufacturing, Direct outsourcing, Indirect, or Undefined.
Costing versions are used to setup standard costs and planned costs. You can
define, item costs, sales prices, purchase prices, cost group prices, and indirect
costs. You can also run calculations for manufactured items.
The two objectives of costing sheet setup include defining the format, and
defining the basis for calculating indirect costs. The costing sheet gives you full
control of the costing breakdown, and allows you to define the calculations for
indirect costs.
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Hands-on Lab Costing and Inventory Valuation in
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