Determining the correct unit price of feed products is crucial for profitability and competitiveness in the feed industry. It involves not just raw material costs but also overheads, labor, production costs, and other indirect expenses. Microsoft Dynamics 365 Business Central provides an efficient way to calculate the unit price while ensuring accurate cost allocation and financial control.
Key Components of Unit Price Calculation
The unit price of feed products is calculated by considering various cost elements, including:
- Raw Material Costs – The cost of ingredients like grains, protein sources, additives, and vitamins.
- Labor Costs – Wages paid to employees involved in production, quality control, and packaging.
- Overheads – Indirect costs such as rent, utilities, machinery maintenance, and administrative expenses.
- Manufacturing Costs – Expenses related to equipment usage, depreciation, energy consumption, and factory operations.
- Logistics and Distribution Costs – Costs for transportation, warehousing, and order fulfillment.
- Regulatory and Compliance Costs – Expenses incurred to meet industry standards and legal requirements.
- Profit Margins – A percentage markup added to ensure business profitability.
How Microsoft Dynamics 365 Business Central Helps in Cost Calculation
Microsoft Dynamics 365 Business Central automates cost tracking and price calculation using various modules and tools. Below are key functionalities that assist in computing an accurate unit price:
- Item Costing and BOM (Bill of Materials)
- Tracks raw material costs through the BOM module, ensuring precise ingredient pricing.
- Calculates material consumption per batch to determine real-time cost per unit.
- Overhead Allocation
- Uses Cost Allocation Rules to distribute overhead expenses proportionally across batches.
- Enables tracking of indirect expenses such as utilities, rent, and administrative costs.
- Work Centers and Routing Costing
- Defines work center rates to factor in machine usage, labor, and energy costs.
- Calculates stage-wise production costs based on process routing.
- Landed Cost Calculation
- Tracks logistics, transportation, and warehousing expenses in Landed Cost Journals.
- Allocates these costs to the final product cost structure.
- Profit Margin Setup
- Configures pricing policies and markups to determine the final selling price.
- Ensures that unit pricing covers all expenses while maintaining a profitable margin.
Step-by-Step Guide to Calculate Unit Price in Business Central
- Define Item and BOM – Set up raw material items and their respective BOM structure.
- Record Production Costs – Input labor, work center, and machine costs.
- Allocate Overheads – Distribute expenses like rent, utilities, and maintenance across production batches.
- Calculate Landed Cost – Add transportation, customs, and warehousing expenses.
- Apply Pricing Strategy – Determine the selling price using cost-plus or margin-based methods.
- Monitor and Adjust – Use Power BI reports in Business Central to analyze cost trends and adjust pricing dynamically.
Conclusion
By leveraging Microsoft Dynamics 365 Business Central, feed manufacturers can accurately compute unit prices by integrating material costs, overheads, and indirect expenses. This ensures transparency, profitability, and competitiveness in the market. Implementing automated cost calculations through Business Central not only simplifies pricing but also enhances decision-making and financial control.
For a customized solution on cost tracking and pricing in the feed industry, consult with our experts today!
