BOP Program Statement 8337.01 § 6

a. Annual Schedule. The FMB must enter new activity rates for

the new fiscal year into Millennium by December 1. FMB will

notify the PSC when these new activity rates are entered so that

new cost standards can be generated.

The PSC will release new corporate standard costs by

January 31.

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b. Key Change Indicators. Revision of corporate standard

costs to revalue corporate inventories are authorized when:

! There is a significant change in total cost on standard

inventory items resulting from, but not limited to,

BOM, ISR, materials, and activity rate

change/restructuring.

! Requested by the FMB.

c. Costing by Manufacturing Strategy. There are three MRP

planning strategies FPI uses.

(1) Make-To-Stock (MTS) Items (MRP planning strategy 41)

that are in current production or have stock in inventory will

have corporate standard costs. Annual re-costing of slow moving

items in inventory is required only when the item has been

produced in the current fiscal year.

Ordinarily, new production items will use planning strategy

41 for costing. The use of other planning strategies for costing

must be approved by the appropriate General Manager, Product

Support Center Manager, and the FMB Controller.

(2) Make-To-Order (MTO) Items (MRP planning strategy 20)

have unique characteristics that are specified by the sales

order. Manufacturing cost variances are calculated according to

the production order BOM and routing and are not settled against

the inventory standard value.

Variances are settled against the sales order.

Normally, MTO items are not placed into inventory for more

than a few days. MTO items are placed into customer stock and

valued at the production order’s planned cost. A standard value

for an MTO item is only necessary if it is placed into inventory

as unrestricted stock or transferred via Stock Transfer Order

(STO).

(3) Variant configured (VC) Items (MRP planning strategy

25) are custom items and therefore cannot have a standard cost.

Whenever VC items are placed into inventory as unrestricted

stock, a standard value of a representative configured item must

be calculated.

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Simulation costing of a representative configured item will

be completed and used to establish a standard inventory value for

configured items before placement into inventory as unrestricted

stock or transferred via STO.

AW/SOIs must ensure that the standard costs of MTO and VC items

placed in unrestricted stock are reviewed systematically for

accuracy of BOMs and routings and consistency with work

measurement source data.

/s/

Harley G. Lappin

Director