Cost estimates are made by performing a What if? schedule on a quantity and then analysing the results.

The results of the What if? schedule, and the quantity it applies to, are saved in the associated material record and used to calculate estimated costs for quotes and orders. When an estimated cost for a quote/order is required, it's calculated by taking the saved total cost, removing the setup contribution, pro-rata'ing the rest, then adding the setup back again. This is reasonably accurate when the costs are related to the quantity in a linear manner and there are no minimum constraints in force. In more complex situations, you can check the Always re-calculate costs option in the material record to force the costs to be calculated by performing another What if? schedule for each specific case. This can be slow, so only do it if accurate estimated costs are critical to you.

The treatment of the setup element in the above algorithm is important and depends on the quantity being costed and the charge for whole batch setting in the material record or the PART record in the method using the material. When a costed quantity exceeds the minimum batch/quantity constraints, or exceeds the costed batch quantity, the whole of the setup cost is charged. When a costed quantity is less than this minimum, the setup cost is pro-rata'd to reflect that some of the setup cost is attributable to the excess stock created. When the Charge for whole batch option is selected, the whole setup cost is always charged.

With multi-level structures each with their own constraints, the cost contributions from each level can get very complex. You can see the complete breakdown by checking the I want to see the cost breakdown option when calculating estimated costs.

When calculating estimated costs for an assembly involving manufactured sub-assemblies, it's recommended you use a batch quantity that represents a typical batch quantity for the sub-assemblies. This will have the effect of amortising the setup costs for the sub-assemblies across the quantity you costed.

If you want setup costs to 'disappear' from a cost estimating point of view, use a very large batch quantity when calculating it. The setup cost will be pro-rata'd across this large quantity and thus become insignificant.