When a custom batch is created, you define that X items are produced using Y raw materials.
Based on this, two types of costs are calculated:
Actual Cost: Based on the actual quantities of raw materials consumed (Y items).
Expected Cost: Based on the Bill of Materials (BOM) defined for the finished goods (X items).
Example Scenario
Suppose you create a custom batch where:
Finished Goods (X):
10 Apple Shakes
5 Apple Juices
Raw Materials Used (Y):
2 Apples (₹100 each)
1 Sugar packet (₹50)
Step 1: Calculate Actual Cost
Actual cost is derived from the total cost of raw materials used:
Apples: 2 × ₹100 = ₹200
Sugar: 1 × ₹50 = ₹50
Total Actual Cost = ₹250
Step 2: Calculate Expected Cost (Based on BOM)
Now, calculate cost based on the predefined BOM for each product.
BOM Definitions:
Apple Shake: 0.1 Apple + 0.01 Sugar
Apple Juice: 0.01 Apple + 0.01 Sugar
Cost Calculation:
For 10 Apple Shakes:
Apples: 10 × 0.1 = 1 Apple → ₹100
Sugar: 10 × 0.01 = 0.1 packet → ₹5
Total = ₹105
For 5 Apple Juices:
Apples: 5 × 0.01 = 0.05 Apple → ₹5
Sugar: 5 × 0.01 = 0.05 packet → ₹2.5
Total = ₹7.5
Total Expected Cost = ₹105 + ₹7.5 = ₹112.5
Key Takeaway
Actual Cost (₹250) reflects what was truly spent on raw materials.
Expected Cost (₹112.5) reflects what should have been spent based on standard BOM definitions.
The difference between these values helps identify inefficiencies, wastage, or inaccuracies in production or BOM setup.