What actual costing means in Digit
Unlike accounting methods that rely on an estimated or blended fixed cost (like Standard Costing), Actual Costing means every serialized or uniquely identified item in Digit tracks its real cost per unit as it moves through production.
This approach gives you the clearest, most accurate view of your profitability because the final cost of a finished item dynamically includes all associated expenses based on what actually happened in production.
The real cost per unit
Each output's actual cost is dynamically calculated and includes:
Material costs – based on the value of all components consumed at the moment they were picked (this is the cost on that specific inventory label).
Labor costs – based on the user or operation rates tied to the actual time tracked on the Manufacturing Order (MO).
Overhead or applied costs – these are not automatically applied by default but can be manually added to a Manufacturing Order under the Costing tab if you need to factor in things like utility usage or shop supplies.
The actual cost per unit is determined when the total accumulated cost of materials, labor, and overhead for an MO is divided by the total number of units produced on that specific run.
How costs are tracked in real-time
Digit's real-time traceability means that your costs are being continuously calculated, providing the most current and accurate value for every item throughout the production process.
This dynamic recalculation happens every time a key production event occurs:
Event | Real-Time Cost Update Behavior |
Material picked | Adds the actual material cost (from the picked label's real unit cost) to the MO's accumulated cost. |
Labor logged | Adds the calculated labor cost proportionally to the MO’s expected or current output quantity. |
Output created | Divides the total accumulated MO cost by the total quantity produced to calculate the new actual cost per unit for that specific run. |
MO completed | Locks the final cost and marks all linked outputs (inventory) as Final Cost. |
MO reopened | Reverts costs for linked items back to Pending until the order is re-completed. |
Understanding pending cost and finalization
To maintain accuracy, Digit uses a Pending Cost flag to clearly distinguish between costs that are finalized and those that are still provisional (in progress). Think of it as a temporary tag showing the cost is still being calculated, which is essential for audit trails.
When you'll see the pending flag
A Pending Cost appears when the full cost of production hasn't been finalized yet. This is common for multi-layered assemblies where the cost of a component is still being determined by a prior, unfinished Manufacturing Order.
You will see the Pending Cost flag in a few scenarios:
A Manufacturing Order is still in progress (status: In Production or In Quality Check).
Inventory labels created from that MO are not yet finalized.
A downstream MO uses materials from an in-progress MO (subassembly costing is pending).
A Sales Order ships items that include pending-cost inventory (this ensures the cost is fixed when it's finalized, not when it ships).
💡 Pro-Tip
If an MO that should be completed still shows a Pending Cost, it often means an operator forgot to click the Complete button on an associated work order. You can go back, complete the work order, and the cost will cascade up to all related objects.
Where you'll see the pending flag
Pending Cost indicators appear across the interface to help you quickly identify provisional versus finalized costs:
MO Costing tab: Displays Pending Cost badges for any materials or subassemblies still linked to in-progress MOs.
Inventory > Labels view: Includes a Cost per UoM column that indicates the item's cost status as Pending or Final.
COGS Report: Exports include a "Cost Status" column (Pending/Final), allowing accountants to easily identify items that are still awaiting finalization.
When pending costs clear
Once all linked Manufacturing Orders in the entire production chain are completed, the Pending Cost flags will automatically clear. The final, locked costs will then cascade throughout all dependent inventory, subassemblies, and any shipments, ensuring all your financial data is accurate and ready for your accountant.
In reports the Cost status will be clearly labeled as Pending or Final.
Best practices for actual costing
Getting accurate cost data is all about keeping your production activity up-to-date in Digit.
Close MOs Promptly: The cost finalizes when the Manufacturing Order is marked as Completed. To ensure you have reliable data for your financial reporting, get into the habit of closing out MOs and their final work orders as soon as the items are physically finished.
Prioritize Closures for Accounting Dates: To ensure the highest degree of accuracy for your financial statements, always complete all MOs that impact inventory before your month-end or quarter-end accounting dates. This guarantees your Cost of Goods Sold (COGS) reports reflect finalized actual costs, not pending values.
Manage Multi-Layered Assemblies: If you produce complex items using subassemblies, try to create and complete smaller, distinct MOs for those subassemblies first. This allows their costs to finalize sooner, which then ensures the cost is locked before they feed into your final finished goods MO.
Review Your COGS Report Regularly: Use the Cost Status column in your Cost of Goods Sold (COGS) Report. This is your safety net! You can use it to quickly identify and close any forgotten MOs that are delaying your costs from finalizing.
Frequently asked questions
How does Digit handle COGS if an item ships with a pending cost?
How does Digit handle COGS if an item ships with a pending cost?
Digit records the current pending cost at the time of shipment for the Cost of Goods Sold (COGS) calculation. Crucially, once the linked Manufacturing Order (MO) is completed and the final cost is locked, Digit automatically generates an adjustment ledger entry to update the COGS to the final, accurate cost. This ensures all financial reports reflect the true cost, even on past shipments.
Are labor costs a single blended rate or tied to specific users/operations?
Are labor costs a single blended rate or tied to specific users/operations?
Labor costs are tied specifically to the user, job title, or operation rate that you define in Digit. When an operator tracks time on an MO, the system uses their actual hourly rate to calculate the labor cost. This provides granular and traceable labor costs, not a broad, blended average.
Does Digit support FIFO, LIFO, or Weighted Average costing methods?
Does Digit support FIFO, LIFO, or Weighted Average costing methods?
Digit is built on an Actual Costing model, which is similar to a perpetual FIFO (First-In, First-Out) method, as it tracks the unique, actual cost of every single inventory label (lot/batch) from acquisition through production to sale. This gives you the most precise cost data for traceability and margin analysis.
What happens if a completed MO's output quantity is changed?
What happens if a completed MO's output quantity is changed?
Output quantities cannot be changed on completed MOs. If the MO is put back into an in progress state to edit any aspect - picked materials, labor, or output - it will return to a Pending state in addition to downstream places using it's output. Once changes are made and the MO is closed again, Digit automatically recalculates the Actual Cost Per Unit (Total Accumulated Cost / New Output Quantity) and then cascades this new final cost to any downstream assemblies or shipments, maintaining complete data integrity and traceability.
If you have additional questions please reach out to your Customer Success Manager or contact our sales team ([email protected]).