# How to calculate item cost prices in Infor LN > Source: https://netray.co/erp-help/ln-cost-price-calculation-how-to > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: ERP Help ## Short answer Infor LN calculates an item's cost price by rolling up material, labor, machine, subcontract and overhead costs defined against cost components, using the item's bill of material and routing as the calculation base for manufactured items and purchase price for bought items. The calculation can run in simulation mode to preview the result or in update mode to actually change the item's standard cost, which then drives inventory valuation and variance reporting going forward. ## Kind how-to ## System infor-ln ## Erp Infor LN ## Module Common / Cost Calculation ## Query how to calculate item cost prices in Infor LN ## Alternate Queries - infor ln cost price calculation and simulation - infor ln standard cost update process - infor ln cost component structure explained - how does infor ln roll up manufacturing cost ## Applies To Infor LN Enterprise Edition, Common / Cost Calculation module ## Steps ### Run a cost price calculation for an item or item set **Items:** Common > Item Data > Cost Prices > Cost Components: confirm the cost components defined for the company (material, labor, machine, subcontract, overhead) are set up as needed before running any calculation. Confirm the item's bill of material and routing are current for manufactured items; the calculation rolls up exactly what these structures define, including any obsolete or inactive components. Common > Cost Calculation > Cost Price Calculation and Simulation: select the item(s), warehouse, and calculation method (single-level or multi-level, depending on whether sub-assembly costs should be recalculated or taken as-is). Run the calculation first in simulation mode, which produces a cost breakdown by component without updating the item's live standard cost. Review the simulated result against the current standard cost, checking for unexpected swings that usually indicate a stale BOM, routing rate, or purchase price. Investigate and correct the source data (BOM quantity, routing time, resource rate, or purchase price) rather than accepting an implausible number. Re-run simulation until the result is validated, then run the same session in update mode to write the new cost price to the item. Confirm the effective date and whether the update should apply immediately or at a future date, since some sites time cost updates to a period boundary. Reconcile inventory valuation after an update run, since a standard cost change on items already in stock generates a revaluation entry to Financials. ## Sections ### Cost components and why the breakdown matters **Body:** LN does not store a single cost number; it stores cost by component (material, labor, machine, subcontract, overhead, and any company-specific components configured). This breakdown is what makes variance analysis useful later: a purchase price change shows up as a material variance, a routing time change as a labor or machine variance, instead of one opaque total drifting for an unclear reason. Overhead components in particular are usually applied as a rate or percentage defined at the work center or item group level, not entered per item, so an overhead swing across many items at once almost always traces back to one rate change rather than dozens of individual item edits. ### Single-level vs multi-level calculation **Body:** A single-level calculation takes the cost of sub-assemblies and purchased components as they are currently recorded and rolls up only the top level's own BOM and routing. A multi-level calculation recalculates every sub-assembly's cost from its own BOM and routing first, then rolls that fresh cost up through the parent, which is the correct choice whenever a lower-level component's cost has changed and you need the change to propagate. Running single-level after a lower-level change will silently understate or overstate the parent's cost because it is still using the old sub-assembly figure; this is one of the more common causes of a cost calculation result that does not match expectations. ### From cost price to inventory valuation **Body:** Once a cost update runs, the new standard cost applies to new transactions going forward, but existing on-hand inventory valued at the old cost typically requires a separate revaluation step to bring book value in line, generating its own integration transaction to Financials. Sites that skip this step end up with inventory value on the balance sheet that no longer matches the item's current standard cost times on-hand quantity. Purchase price variance and manufacturing variance reporting both depend on the standard cost being current; a stale cost price makes every subsequent variance report noisy and hard to act on. ## Pitfalls - Running an update calculation directly without reviewing a simulation first, and only noticing an error after inventory has revalued. - Using single-level calculation after a sub-assembly cost changed, which leaves the parent item's cost stale. - Forgetting that an inactive or superseded BOM component still gets costed if it has not been properly ended on the BOM. - Not reconciling inventory revaluation to Financials after a cost update, leaving the general ledger out of step with the item master. - Changing a routing rate or overhead percentage without re-running cost calculation for all affected items, leaving some items on stale cost. - Confusing standard cost with the sales price or last purchase price, which are separate fields entirely. ## Ai Angle ERPray can pull the current cost breakdown by component for an item and flag when it looks stale relative to the item's BOM, routing or last purchase price, without a cost accountant manually cross-checking each source. It can also explain in plain terms why a specific item's cost changed between two calculation runs by comparing the component-level detail, which is usually the tedious part of a variance investigation. ## Faq ### What is the difference between simulation and update mode? **Answer:** Simulation calculates and displays the result without changing the item's live standard cost, useful for validating source data first. Update mode writes the calculated cost to the item and, for items already in stock, typically triggers a revaluation to Financials. ### Why did my cost calculation not change even though the purchase price changed? **Answer:** Check whether the item's costing method actually references the current purchase price versus a fixed standard purchase cost field, and confirm the price change was saved and effective as of the calculation date. ### Does cost calculation account for scrap or yield loss in the routing? **Answer:** Yes, where scrap percentage or yield is defined on the routing operation or BOM component, the calculation factors it into the effective quantity and cost, so an unrealistic scrap percentage will distort the calculated cost. ### How often should cost price calculation be re-run? **Answer:** Most manufacturers run it on a defined cycle (monthly or quarterly) plus whenever a significant BOM, routing, or purchase price change occurs, rather than continuously, since a cost update triggers a revaluation that finance needs to plan for. ## Search terms infor ln cost price calculation, infor ln cost simulation, infor ln standard cost update, infor ln cost component structure, infor ln single level vs multi level cost, infor ln inventory revaluation, infor ln bom routing cost roll up, infor ln purchase price variance --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json