Katana enables you to track accurate production costs for your products based on the actual cost of ingredients and production operations.
When completing Sales orders (SO), you can then track the profitability of sales. The Done Sales orders table displays the sales revenue, Cost of Goods Sold (based on the Average cost for products sold), and Profit for each SO - read more.
The Manufacturing cost for products is the sum of ingredient costs and production operations costs. You can define default ingredients and production operations for each product variant on the item card.
Ingredient costs
When a Manufacturing order (MO) is created for a product, the default ingredients are pulled to the MO from the product recipe of the product variant.
The Cost for ingredients on the MO is the Average cost of the ingredient in Stock multiplied by the total quantity of the ingredient used for the MO.
For an Open MO, the Cost is calculated and displayed based on the planned quantity of ingredients. When the MO is completed, the Cost is recalculated based on the actual quantity of ingredients used if the actual quantity is different from planned.
As Average cost for ingredients changes over time (e.g. material is purchased at different costs), the manufacturing costs for a product will change accordingly.
If the Ingredient isn't available in Stock and the In stock quantity for the ingredient is 0, the Average cost for the ingredients is also 0. In this case, the MO will initially display the Default purchase price of an ingredient as the Cost. If the MO is completed before the ingredient is not in stock [NOT RECOMMENDED], then 0 cost will be used for this ingredient towards the manufacturing cost calculations.
You can edit ingredients directly on the MO. Add or remove ingredients if you are using different components than what is defined in the default Product recipe.
Production operation costs
If a MO is created for a product, the default Production Operations are pulled to the MO from the production operations defined for the product variant.
The Cost for Operations on the MO is the total time spent on the task multiplied by Cost per hour.
Cost per hour is not directly visible on a MO but it can be defined on the Production operations tab on a product card or edited on the MO by clicking on the Cost for a specific operation.
Operations cost for a product is the Actual time spent on a task multiplied by Cost per Hour.
Read more about tracking the Actual production time in Katana.
If an Operation is completed by changing the Operation status to Completed without the operation being In progress for a certain period, the planned time will automatically be used as the actual time.
If a MO is completed by changing the status to Done without completing the Operations individually, the planned time will automatically be used as the actual time for all tasks that were not completed at the time.
Manufacturing cost on productions for partially completed MOs
When a MO status is Partially complete, the cost of the product produced is the planned cost of this — it is calculated based on the planned quantity of ingredients and planned operations time. The cost is visible under the Total cost of production.
If you entered the actual quantity different than planned, while changing the MO status to Done, the cost of all products produced by that MO is recalculated according to consumed materials and operations time.
When the MO status is changed to Done, you can find the actual cost of each production on the Completed tab of that MO.
The actual cost is divided equally among all products produced by that MO
Only the cost of products, where production's completed date is in a closed inventory period, won't be recalculated, and the Total cost is used as the actual cost instead.
Once a production completed date is in a closed inventory period, even though the MO is in partially complete status, the actual cost is shown on the production.
You can find the productions with reference to the MO and completed quantity in Stock by opening the product inventory intel by clicking on the Value in stock or In stock of the product.
The Cost/Price per unit in Inventory intel
When a MO is Partially complete = the Total cost of production
When a MO is Done = the Actual cost of production.