Too low and you loose your profit, too high and you loose your orders. Today, more than ever, price, which very often is determined by the market, is the deciding factor in securing new orders. Because of ever changing customer requirements, manufacturing methods and technologies, it has become impossible and highly unreliable to calculate margins based exclusively on past experience.
This is why TIM calculates both standard and actual costs allowing for changes in production plans and actual manufacturing processes to be considered online. Prices are fixed, costs vary, and therefore margins per product unit and for machine hour calculated by TIM are the critical decision factor.
Standard Costs
The MAIS module is used to describe and manage the bill of material and the operations’ technical data. This information is used to calculate standard product costs on the basis of raw material requirements, production capacity needs as well as labor and overhead consumption.
The MAIS module supports full, variable and fixed cost methods, along with contribution margin costing and Activity Based Costing (ABC). It provides finely detailed costing roll-ups that can be used as a basis for quoting and margin analysis. It allows for the critical analysis, necessary to operate in a global market.
To help maximize profits, the system is also equipped with a complex and effective simulation process to determine optimal production mixes.
Actual Costs
TIM uses MACO to calculate variances at all levels from the standard costs calculated by MAIS. Each product is linked to one or more process flows allowing to roll-up a standard product cost and freeze it to enable an ongoing calculation and application of variances.
For each product manufactured during a specific period, MACO calculates the production value of standard budget costs (cost reference at the beginning of the period), current standard cost (actual cost reference), planned costs based on planned flows (flow indicated on manufacturing order), actual costs of production orders (from data collection) and costs from the General Ledger (when available).
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