Cost Components

Cost components are different types of costs that make up the value of an inventory increase or decrease.

The below table shows the different cost components and any subordinate cost components that they consist of.

Cost component	Subordinate cost component	Description
Direct cost	Unit cost (direct purchase price)	Cost that can be traced to a cost object.
	Freight cost (item charge)
	Insurance cost (item charge)
Indirect cost		Cost that cannot be traced to a cost object.
Variance	Purchase variance	The difference between actual and standard costs, which is only posted for items using the Standard costing method.
	Material variance
	Capacity variance
	Subcontracted variance
	Capacity overhead variance
	Manufacturing overhead variance
Revaluation		A depreciation or appreciation of the current inventory value.
Rounding		Residuals caused by the way in which valuation of inventory decreases are calculated.

Freight and insurance costs are item charges that can be added to an item’s cost at any time. When you run the Adjust Cost - Item Entries batch job, the value of any related inventory decreases are updated accordingly.