# Product Costing Accuracy Self-Assessment > Source: https://netray.co/tools/product-costing-accuracy-health-assessment > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Free Tools ## Short answer A ten-question self-check that scores how trustworthy your standard costs and job costs are and what to fix first. ## Category cost-finance ## Industry Discrete Manufacturing ## Audience - Plant controller - Cost accountant - Operations manager ## Tool **Kind:** assessment **Questions:** #### How often are standard costs rolled up and reviewed? **Options:** ##### Only at year end or never **Score:** 0 ##### Once or twice a year **Score:** 1 ##### Quarterly **Score:** 2 ##### Quarterly with documented review and approval **Score:** 3 #### How accurate are your bills of material? **Help:** Think of cycle count and job close findings. **Options:** ##### Frequent shortages or extra issues **Score:** 0 ##### Mostly right, with known problem products **Score:** 1 ##### Audited periodically **Score:** 2 ##### Audited and engineering changes controlled **Score:** 3 #### How are routing times set? **Options:** ##### Estimates nobody has checked **Score:** 0 ##### Set at launch and rarely updated **Score:** 1 ##### Updated when large variances appear **Score:** 2 ##### Compared with actual reported times on a schedule **Score:** 3 #### How are labor and machine rates calculated? **Options:** ##### Single plant rate, unchanged for years **Score:** 0 ##### Updated yearly with the budget **Score:** 1 ##### Rates by work center, updated yearly **Score:** 2 ##### Rates by work center, reviewed when mix or equipment changes **Score:** 3 #### How is overhead absorbed into products? **Options:** ##### Not sure **Score:** 0 ##### Percentage of direct labor **Score:** 1 ##### Labor or machine hours by department **Score:** 2 ##### Hours or activity drivers reviewed against cost behavior **Score:** 3 #### How do you handle variances at job close? **Options:** ##### Posted to COGS without review **Score:** 0 ##### Reviewed only when large **Score:** 1 ##### Reviewed monthly by category **Score:** 2 ##### Reviewed monthly with root cause and corrective action **Score:** 3 #### How current are purchased item costs? **Options:** ##### Old prices remain until something breaks **Score:** 0 ##### Updated yearly **Score:** 1 ##### Updated when purchase price variance is large **Score:** 2 ##### Reviewed regularly against recent receipts and supplier quotes **Score:** 3 #### How reliable are shop floor reporting and scrap data? **Options:** ##### Mostly missing or batched at shift end **Score:** 0 ##### Reported but often wrong **Score:** 1 ##### Mostly timely and accurate **Score:** 2 ##### Timely, with scrap reason codes reviewed **Score:** 3 #### Do you compare quoted cost with actual cost? **Options:** ##### Never **Score:** 0 ##### Occasionally for big jobs **Score:** 1 ##### For most jobs, informally **Score:** 2 ##### Systematically, with feedback into the estimating rates **Score:** 3 #### Can you explain inventory valuation changes between periods? **Options:** ##### No **Score:** 0 ##### Only with significant effort **Score:** 1 ##### Yes for the main drivers **Score:** 2 ##### Yes, with reconciliations to the ledger each month **Score:** 3 **Bands:** #### Costs are unreliable **Min:** 0 **Max:** 30 **Verdict:** Pricing and margin decisions are probably being made on weak numbers. **Recommendations:** - Start by auditing BOMs and routings on your top revenue products - Review close variances monthly to find the biggest leaks - Recalculate machine and labor rates from actual annual cost #### Partly reliable **Min:** 31 **Max:** 60 **Verdict:** The basics exist but updates and checks are inconsistent. **Recommendations:** - Set a fixed cost review calendar - Compare routing times with reported actuals for the top work centers - Add variance root cause notes to month end #### Reasonably controlled **Min:** 61 **Max:** 85 **Verdict:** Costing is disciplined. Gains now come from closing the loop with quoting. **Recommendations:** - Feed actual job cost back into estimating rates - Review overhead drivers when automation changes the mix - Automate variance reporting out of the ERP #### Strong costing discipline **Min:** 86 **Max:** 100 **Verdict:** Your process is well controlled. Keep it current as products and equipment change. **Recommendations:** - Keep documented reviews on schedule - Test sensitivity of key products to material price moves - Share costing dashboards with sales and operations ## Content **Intro:** Product cost is only as good as the BOMs, routings, rates and updates behind it. This ten-question check gives you a score and a short list of where to look first. **Sections:** #### How to use the assessment **Body:** Answer each question for your plant as it is today, not as the procedure says it should be. Ask the cost accountant and a production supervisor to answer separately, since their answers often differ. The score is a percentage of the maximum, and the result band suggests what to work on first. Export the result to share with your team. **Bullets:** - Answer on actual practice - Compare answers from finance and operations - Re-run after each improvement cycle #### What the questions test **Body:** The questions follow the cost build-up: material through the BOM, labor and machine time through routings, rates and overhead absorption, then the feedback loop of variance review, shop floor data and quoted versus actual comparison. A weak link at any step carries through to every product that depends on it, and to every quote priced from it. #### Reading your result **Body:** Low scores usually point to one or two root causes, most often outdated routing times or unmanaged BOM changes. Mid scores mean controls exist but are applied unevenly. High scores shift the focus from correctness to speed and feedback: automating reports and linking quotes to actuals. Treat the band as a prompt for an audit, not a verdict. #### Common mistakes **Body:** Teams often fix rates before fixing times, then spend months debating variances caused by bad routings. Others update standards after every price move, which makes variance analysis useless. Update on a schedule, document why, and keep a history so period comparisons stay meaningful. **Cta:** If you want a view of variances and cost accuracy that updates from your ERP without manual spreadsheets, Netray can discuss a read-only reporting setup. **Faq:** #### How often should standard costs be updated? **Answer:** Many manufacturers do a full roll once a year and a review each quarter. The right cadence depends on price volatility and product change. Avoid constant changes, because they make variances hard to interpret. #### What is a good sign of costing accuracy? **Answer:** Small and explainable variances at job close, routing times close to reported actuals, and quoted cost close to actual cost across a range of jobs. Persistent one-sided variances suggest the standard is wrong. #### Should finance or operations own routing times? **Answer:** Operations or industrial engineering should own the times, since they know the process, while finance reviews the effect on cost. Shared review stops each side from blaming the other when variances appear. #### Does this replace a formal costing audit? **Answer:** No. It is a quick self-check to find where to look. A formal audit tests BOMs, routings, rates and postings with sample data and reconciliations to the ledger. ## Search terms product costing accuracy, standard cost accuracy assessment, costing health check, manufacturing costing audit, how accurate is my product cost, bom routing accuracy, cost roll up review --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json