# Cost Roll-Up

> Source: https://netray.co/glossary/cost-roll-up
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Glossary

## Short answer

A cost roll-up calculates the cost of manufactured items by summing the cost of purchased components, routing labor, machine time and overhead from the lowest BOM level up to the finished product. The result is usually saved as standard cost.

## Aliases

- cost rollup
- standard cost roll up
- BOM cost rollup

## Category

erp-core

## Full Definition

The roll-up starts at the bottom of the bill of materials. Purchased and raw items take their cost from a purchase price, average cost or a manually set standard. Each manufactured subassembly then adds the cost of its components, plus the labor, setup and overhead from its routing, and passes that total to the next level up until the finished item is costed.

Inputs must be right for the result to mean anything: accurate BOM quantities and scrap factors, routing run times and setup times, work center rates, and current component costs. Yield or scrap assumptions inflate the roll-up, and a phantom BOM is rolled through as if its components belong to the parent.

Every major ERP has a roll-up routine. SAP runs a standard cost estimate with CK11N for one material or CK40N for the marking and release workflow. Dynamics 365 Business Central has a Roll Up Standard Cost batch job. NetSuite lets you update standard cost from a roll-up of components and routing on the item record or through standard cost revaluation. SyteLine and Infor LN provide cost calculation routines driven by the item cost type and cost components.

A common practice is to run a trial roll-up, compare it with the current standard, review the largest changes, and only then release the new standard and post the inventory revaluation.

## Why It Matters

- It sets the standard cost that inventory valuation and margin reports depend on.
- It exposes BOM and routing errors, because absurd rolled costs usually trace to bad quantities, units or rates.
- Annual or quarterly roll-ups keep standard cost close to the real cost of materials and labor.
- Costing a proposed engineering change before release shows its price impact in advance.

## In Practice

A pump assembly BOM has components costing 180, a subassembly rolled to 95, and routing time of 1.5 hours at a 60 combined labor and overhead rate, which is 90. The roll-up gives 180 + 95 + 90 = 365. If a casting price rises 10 percent and costs 40, the next roll-up would add 4 per unit and flag a purchase price variance until standards are updated.

## Faq

### How often should I run a cost roll-up?

**Answer:** Most manufacturers do it at least annually, and many quarterly. More frequent roll-ups mean more revaluation entries, so teams balance accuracy with workload.

### Does a roll-up change inventory value?

**Answer:** Releasing a new standard cost revalues on-hand inventory and WIP to the new cost, which posts a revaluation entry to the general ledger.

### Why does my rolled cost look wrong?

**Answer:** Typical causes are wrong unit of measure on BOM lines, missing or inflated routing times, outdated work center rates, or components that still have no cost.

## Search terms

cost roll up, cost rollup ERP, standard cost roll up, BOM cost rollup, rolled up cost, multi level BOM cost, update standard cost, CK11N cost estimate

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