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Outsourced purchase order (OPO) product costs
Outsourced purchase order (OPO) product costs

Track OPO product costs in Katana, including purchase price and ingredient costs.

Dayvid Lorbiecke avatar
Written by Dayvid Lorbiecke
Updated over a week ago

Katana supports accurate tracking of outsourced manufacturing product costs, incorporating the purchase price and actual ingredient costs. Understanding how these costs are calculated and applied ensures precise financial oversight and effective pricing strategies. This article explains how to manage and track these expenses to maintain profitability and cost-efficiency in outsourced operations.

You can track fully outsourced manufacturing product costs based on the manufacturing service's purchase price, Additional costs and the actual cost of ingredients using Katana.

After completing a sales order (SO), you can track the profitability of sales. The Done SOs table displays sales revenue, Cost of Goods Sold (based on the Average Cost for products sold), and Profit for each SO. Read more

The OPO cost for products is the sum of the purchase price (or landed costs) and ingredient costs. You can define a default purchase price and ingredients for each product variant on the item card.

Purchase price

Purchase price is the per unit price that a contractor charges for the manufacturing of ordered products. The purchase price can be in a different currency than the base currency. Read more

Landed cost

Landed cost per unit includes the purchase price and the distributed additional costs. The landed cost can be in a different currency than the base currency. The "by value" distribution method of additional costs uses OPO item row purchase prices for calculating the landed costs.

Ingredient costs

After a product is added to an OPO, the default ingredients are pulled to that OPO's Track ingredients tab from the product recipe of the product variant.

The Cost for ingredients on an OPO equals the Average cost of the ingredient in the Tracking location Stock multiplied by the total quantity of the ingredient used for the OPO. Ingredients cost is always in base currency.

The Track ingredients tab of an outsourced purchase order

Since the Average Cost for an ingredient changes over time (e.g. material is purchased at different prices), the costs for a product will change accordingly.

If an Ingredient is unavailable in Stock and the In stock quantity for the ingredient is 0, the Average cost for the ingredients will also be 0. In these cases, an OPO will initially display the Default purchase price of the ingredient as the Cost. If the OPO is then completed while the ingredient is not in stock (NOT RECOMMENDED), 0 cost will be used for this ingredient for the product cost calculations.

You can edit the ingredients on the OPO. Add, remove or change ingredients if you are using different components than defined in the default Product recipe for the product.

Cost per unit

For products with a recipe / BOM added to the OPO, Katana calculates the product cost per order unit in base currency.

The track ingredients tab of an outsourced purchase order - highlighting the product cost per unit

The calculation formula is Price per unit (or Landed cost per unit) in base currency + Product ingredient cost per unit = Product cost per unit.

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