Using Dynamics AX To Calculate The Cost Of Your Breakfast

You don’t have to be running enormous batches of products through a large production line in order to take leverage the costing within Dynamics AX. One of my new years resolutions was to work out how much my morning smoothie was costing so I thought that I would just model it out within Dynamics AX, and along the way give everyone a simple introduction on how to create a completely new Bill Of Material and roll up the costs.

How To Do It…

1. The first step in the process is to create your parent product that you will create your Bill Of Material for and then use to calculate the rolled up cost of all of the ingredients that you add in. To do this, open up the Released Products list page and then click on the Product button within the New group of the Product ribbon bar.
2. When the New Released Product dialog box is displayed, set the Product Number, Product Name and also set both Search Name fields to a shortened description of the product.
3. Before we continue on click on the Show More Fields link at the bottom of the form and you will notice that there are a few more defaults that we can set up for our product.
4. Next we want to click on the Item Group dropdown list and select a value. Since this is a new type of product though we may want to create a new record so that we can track the postings for the product separately if we ever want to.
5. So we will quickly create a new Item Group that we will assign to our product. To do this just right-mouse-click on the Item Group field and select the View Details menu item.
6. When the Item Groups maintenance form is displayed, click on the New button in the menu bar to create a new record.
7. Give your Item Group an Item Group code and also a Name.
8. While we are here, lets set up a couple more Item Groups for some of the other products that we will be creating.
9. Now that all of the Item Groups have been configured, just click on the Close button to exit from the form.
10. Now click on the Item Group dropdown list and you will be able to choose the new Item Group that you just set up.
11. Now click on the Storage Dimension Group field and select the method that you want to use to locate your product.
12. And then click on the Tracking Dimension Group field and select the method that you want to use to track your product.
13. Next click on the Inventory Unit field and select the Unit Of Measure that you want to inventory your product in.
14. If the unit of measure that you are wanting to use for the product does not exist though you may want to create a new one just for the product. To do this, open up the Units maintenance form and click on New button within the menu bar to create a new record.
15. Type in the Unit Code that you want to use and also the Description of the unit of measure.
16. By default, the type of Unit Class that is selected is Quantity, but if you are tracking the unit as a different class of unit then you can click on the Unit Class and select a more appropriate value.
17. If you want to track your production results in other units of measure then you will want to set the conversion values that you want to use for this particular unit of measure. To do this, click on the Unit Conversions button in the menu bar.
18. When the Unit Conversions maintenance form is displayed, click on the New button in the menu bar to create a new record.
19. Enter in the Factor and the To Unit for the conversion. The From Unit will automatically default in from the unit of measure.
20. If you want to check the conversion to make sure that it is correct then just click on the Calculate For Units menu item within the menu bar.
21. When you are ready you can just click on the Close button to exit from the form.
22. Now all your Units have been configured and you can just click on the Close button to exit from the form.
23. Now return back to the New Released Product form and you will be able to click on the Inventory Unit dropdown list and see the new Unit Of Measure that you just configured.
24. Now set the Inventory Unit, Purchase Unit, Sales Unit and BOM
    Unit to the new unit of measure that you created and when you are done click on the OK button to create the product.
25. The Released Product Details form should then open up with your new product.
26. There is one quick tweak that we need to make to the product though and that is to assign a default Site to it. To do this click on the Manage Inventory ribbon bar and then click on the Default Order Settings button within the Order Settings group.
27. Click on the Default Order Type dropdown list and select the Production option so that if we ever create planning orders then it will plan this product as a production order.
28. Now set the Purchase Site, Inventory Site, and the Sales Site to the primary Site you want to associate them with.
29. After you have done that just click on the Close button to exit from the form.
30. Now that we have our parent product configured it’s time to start creating the Bill Of Materials for it. To do this, click on the Engineer ribbon bar within the Released Product Details form and click on the Lines menu item within the BOM group.
31. When the BOM Line maintenance form is displayed, click on the Create BOM button within the menu bar to create a new bill of materials.
32. When the Create BOM dialog box is displayed enter in a new BOM Number, Description, and also the default Site that you want to associate this bill of materials with and then click on the OK button.
33. After the BOM record has been created, click on the New button within the Lines menu bar to create a new record.
34. Since we don’t have any of the raw materials configured yet we will set them up by right-mouse-clicking on the Item Number field and selecting the View Details menu item.
35. When the Released Product Details form is displayed, click on the Product button within the New group of the Product ribbon bar to create a new record.
36. When the New Release Product dialog box is displayed, set the Product Number, Product Name, and both the Search Name fields.
37. Then set the Item Model Group, Item Group, Storage Dimension Group, Tracking Dimension Group, Inventory Unit, Purchase Unit, Sales Unit and BOM Unit.
38. After you have done that just click on the Ok button to create the record.
39. Scroll down to the Purchase tab within the document view and set the default Purchase Price for the product.
40. Then scroll further down to the Engineer tab group and set the Calculation Group for the product.
41. Finally, click on the Cost Group field.
42. We may want to segregate out our costs a little bit differently by creating some new cost groups though. To do this, right-mouse-click on the Cost Group field and click on the View Details menu item.
43. When the Cost Groups maintenance form is displayed, click on the New button in the menu bar to create a new record, and then give your record a Cost Group code and a Name.
44. And then from the Cost Group Type dropdown list select the Direct Materials value.
45. Now that we have done that, just click on the Close button to exit from the form.
46. Now select your new Cost Group that you set up for the product.
47. To finish off the setup of the product we need to just run the cost update so that the BOM will be able to get the correct unit cost. To start doing this, click on the Item Price menu item with in the Setup group of the Manage Costs ribbon bar.
48. When the Item Price maintenance form is displayed, switch to the Pending Price tab and then click on the Calculation menu item within the menu bar.
49. When the Calculation For An Item dialog box is displayed, click on the Costing Version dropdown list and select the version that you want the cost to be posted against.
50. And then select the Site that you want to associate the cost with.
51. And then click on the OK button to perform the cost calculation.
52. When you return back to the Item Price maintenance form, you will see that the price has been calculated from the purchase price. All you need to do is click on the Activate button within the menu bar to approve the price.
53. Now when you look at the Active Prices you will see your cost price.
54. Now just click on the Close button to exit from the form.
55. Now we can return to our Bill Of Material and start adding our ingredients. To do this click on the Item Number dropdown list and select the first product that we want to add.
56. Then select the default Warehouse that we want to source the product from.
57. Then type in the Quantity and Quantity Unit that we will be adding to the product. Since we have our unit of measure conversions configured the Unit does not have to be the same as the primary unit either.
58. Repeat the process for all of the other lines in the BOM.
59. After you have done that you can perform a cost roll up to find out how much your product costs. To do that, just click on the Calculation button within the menu bar.
60. When the Calculation For An Item dialog box is displayed, just click on the Ok button.
61. When the Item Price maintenance form is displayed you will see the rolled up price for your product.
62. If you click on the Complete button in the menu bar then you will see all of the cost breakdowns by item as well.

How cool is that. Setting up Bills of Materials for costing is not that hard, and once you have them set up, you can then start tweaking them to start seeing what the cost impacts would be if there were price changes.

Why don’t you all give it a go?

Need More Information? If you want more detailed information on this walkthrough then you can download the complete walkthrough as a PDF file from the Dynamics AX Companions
website. This includes detailed screen shots showing the step by step instructions and also sample data that you can use to practice yourself or that could be used as training material to teach others how to do it. Just follow the link below.

About The Editor: JT Cutter is the Chief Content Officer at Dynamics AX Companions overseeing all marketing content initiatives for the site. As a bonus with over 15 years as an independent ERP advisory consultant, knows a little about software as well. Track him down on Twitter @jtcutter.