What Is Cost Component?
Also known as: LN cost component, cost component scheme
Definition
A cost component in Infor LN is a bucket that classifies part of an item's cost - material, operation, subcontracting, surcharge or general cost - so standard and actual cost prices can be broken down, rolled up through the bill of material and compared.
Cost Component Explained
An item's cost price is not one number, it is a structure. Cost components are how LN carries that structure. Each element contributing to cost is assigned to a component, so a manufactured item's standard cost resolves into material components from its purchased parts, operation components for labor and machine time from its routing, subcontracting where applicable, surcharges applied as percentages or amounts, and general cost components for overhead allocations.
The structure survives the roll-up, which is the key property. When a subassembly is consumed by a higher-level assembly, its cost does not collapse into an undifferentiated material figure. The components can be aggregated or carried through so that the top-level product still shows how much of its cost is material, how much is labor, and how much is overhead, across every level of the bill of material. That visibility is what makes cost analysis at the finished-goods level meaningful.
Cost components also drive variance analysis and financial posting. Actual costs recorded against production orders are classified into the same components as the standard, so the difference can be reported by category: a material price variance is a different management problem from a labor efficiency variance, and the component structure is what separates them. Integration mapping then uses the component to determine which ledger accounts receive each portion of the posting.
Design decisions here are long-lived. The number of components, whether they are reported in detail or aggregated into a smaller scheme, and how surcharges are structured all determine what questions your costing reports can answer for years. Too few components and you cannot explain a variance; too many and the maintenance burden of rates and surcharges grows faster than the analytical value they deliver.
Why It Matters
- Cost component structure decides whether you can explain a margin change or only observe it.
- Variance reporting by category separates purchasing performance from production performance, which changes accountability.
- Components map to ledger accounts through integration mapping, so costing design constrains financial reporting design.
- Contract and program cost reporting in aerospace and defense depends on components that align with the categories customers audit.
In Practice
Design cost components backwards from the reports and contract cost submissions you must produce. Teams that configure components from the product structure alone frequently find later that they cannot split a cost the way a customer or auditor requires, and retrofitting a new component means recalculating standard costs and losing comparability with prior periods.
Frequently Asked Questions
What types of cost component does LN use?
Broadly, components classify material costs, operation costs covering labor and machine time from the routing, subcontracting costs, surcharges applied as percentages or fixed amounts, and general cost components used for overhead allocation. The exact set is configurable. What matters is that every element of a cost price is attributed to a component so the total can always be decomposed.
How do cost components affect financial posting?
Integration mapping in Financials can use the cost component as one of the elements that determines which ledger accounts and dimensions receive a posting. That means the costing structure and the chart of accounts are linked by design: a component that is not distinguished in costing cannot be posted separately in the ledger, and adding one later affects both configurations.
Related Terms
LN Bill of Material
An LN bill of material is the parent-child list defining which components and quantities go into a manufactured item in Infor LN. Each line carries a position number, net quantity, scrap factor, effective dates and, optionally, the routing operation that consumes it.
Integration Transaction
An integration transaction is the record Infor LN creates when a logistic event such as a receipt, issue, shipment or production completion must post to finance. Mapping schemes translate each transaction into the correct debit and credit ledger accounts and dimensions.
Project Pegging
Project pegging in Infor LN links demand, supply, inventory and cost to a specific project, element or activity. Pegged material is reserved for that project only and its costs flow to the project budget, which is how contract-driven manufacturers segregate program inventory.
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