Costing of Recursive Structures

Use

You can create a cost estimate or execute a costing run for materials and assemblies with
recursive structures. Cycles in recursive BOMs are recognized by the system and costed
iteratively. Cycles normally occur in the process industries in joint production and processes
using production versions.

Features

The materials to be costed are determined automatically by selection and, if applicable, by BOM
explosion in the costing run, or by BOM explosion in the material cost estimate with quantity
structure. (See also Cost Estimate with Quantity Structure: Process Flow and Costing Run:
Concept .)

The system then searches automatically for cycles and assigns them to costing levels. When it
does this, the system does not interpret the recursiveness in the BOM, but evaluates the
previously-created cost estimates.

Materials in a cycle or between two cycles are costed iteratively. Iteration ends after the
convergence criterion "Total amount of all price changes is zero" has been reached. In other
words, the price of the in-going material is the same as the price of the costed material.

Prerequisites for a successful cost estimate are as follows:

 The solution is positive

 The usage is less than the yield
 The yield is significantly higher than the usage

When no solution exists and the cost estimate does not converge, the system recognizes this and
issues an error message.

The number of iterations required increases with proportion of the quantity used and produced of
a material within a cycle. For the cost estimate to be successful, this ratio should be less than
approximately 0.95.

Example

To produce 100 kg of A, 80 kg of A is used.

The system costs material A.

To produce 100 kg of A, 99 kg of A is used.

The system cannot cost material A and issues an error message.

If overhead is applied to a cyclic material in a cycle, the quantity proportion that is yet to be
costed is reduced by the amount of the overhead.

Example

To produce 100 kg of A, 90 kg of A is used. An overhead of 10% is applied to the material costs

of A.

The system cannot cost material A and issues an error message.

If a cyclic material is produced as a co-product, the above condition applies as follows: The ratio
of the used and produced quantity multiplied by the portion of costs assigned to the material in
accordance with the apportionment structure must be lower than approx. 0.95.

Example

To produce 50 kg of A and 200 kg of B, 100 kg of A is used.

 The costs are split between A and B according to the apportionment structure using a 1:1
ratio.

The system cannot proceed with costing and issues an error message.

 The costs are split using a 1:2 ratio.

The system can proceed with costing.

Activities

You create a cost estimate with quantity structure or execute a costing run for the materials and
assemblies that you want to cost. You do not require special settings in Customizing.

For more information, see Creating the Cost Estimate with quantity Structure and Creating the
Costing Run .

See also:

 Bills of Material in Costing

 Recursive BOMs
 Costed Multilevel BOMs