Understand how Katana tracks product costs for outsourced manufacturing, including purchase price, landed costs, and ingredient usage. This helps you maintain accurate financial records and improve pricing decisions.
What contributes to product cost in OPOs?
When you outsource manufacturing via an outsourced purchase prder (OPO), Katana calculates the product cost as:
Product Cost per Unit = Landed Cost per Unit + Ingredient Cost per Unit
Components explained:
Purchase price: The per-unit price charged by your contractor for making the product. Can be in a foreign currency.
Landed cost: Includes the purchase price plus any distributed additional costs (like shipping, handling). Distribution is done by value across line items.
Ingredient cost: Based on the average cost of ingredients in the stock location tied to the OPO.
Purchase price and landed cost
Purchase price: Set per product variant and shown on the item card. This represents the direct cost paid to the contract manufacturer.
Landed cost per Unit:
Includes both purchase price and additional costs.
Calculated using Katana’s "by value" method, which distributes additional costs proportionally based on item value.
May use a different currency from your base currency.
Ingredient costs in an OPO
When a product is added to an OPO, Katana automatically pulls in its default ingredients from the product recipe (BOM).
How ingredient cost is calculated:
Ingredient Cost = Average Cost (from tracking location) × Quantity Used
Ingredient costs are always calculated in base currency.
If stock = 0, the average cost becomes 0.
In this case, Katana initially displays the default purchase price for reference.
Note: Completing the OPO with zero ingredient stock is not recommended, as it will use 0 for that ingredient’s cost in calculations.
Editing ingredients on an OPO
You can:
Add new ingredients
Remove unnecessary components
Change quantities or items used in production
This is useful if your contractor uses alternate components not in the default recipe.
Why is zero cost displayed on the BOM card or OPO in certain stock scenarios?
Katana handles inventory costs and their visibility based on stock at specific locations and the movement of products between those locations. Understanding these mechanics can help troubleshoot scenarios where costs unexpectedly show as zero.
How cost is reflected in BOM and OPO when using outsourced locations
The BOM card and OPOs reflect costs tied to the Main location. When you manufacture items at an outsourced location, they are typically transferred to the Main location for order fulfillment.
Here’s how this impacts cost visibility:
If an item exists only in an outsourced location and the Main location has zero stock for that item, the average stock cost at Main will also display as zero. This results in both the BOM card and OPO reflecting a zero cost until new stock with an associated cost is transferred into the Main location.
Why stock cost sometimes reset to zero
Katana calculates stock costs based on the current average cost for an item at each specific location.
Best practices for managing inventory costs
Ensure consistent stock levels at the Main location for accurate cost representation in BOM and OPO.
Track flows between outsourced and Main locations to understand how transfers and depletion affect cost calculations.
Review incoming stock costs when replenishing inventory to maintain correct average cost calculations.
Viewing product cost per unit
Katana calculates the full product cost per unit directly in the Track ingredients tab on the OPO card.
Formula:
Product Cost per Unit = (Purchase Price OR Landed Cost per Unit) + Ingredient Cost per Unit
This value is in your base currency and updates automatically based on real-time stock and pricing data.
Analyzing profitability
Once a sales order (SO) is completed, Katana shows a breakdown of:
Sales revenue
Cost of Goods Sold (COGS) based on average costs
Profit per SO
Go to the Done SOs table to review past performance. Read more
Summary
Component | Details |
Purchase price | Price per unit from contractor (can be in foreign currency) |
Landed cost | Purchase price + additional costs |
Ingredient cost | Based on average cost at stock location |
Editable? | Ingredients and recipe steps can be edited per OPO |
Currency | Ingredient cost = base currency; purchase price can vary |
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