The preparation steps for maintaining purchased item costs involve additional considerations when the purchased items are used as components in a bill of material (BOM). Policies that are assigned to these purchased items affect the cost calculations for their parent manufactured items. To prepare for maintaining purchased item costs, perform the following steps:

1. Assign an inventory model group to the purchased item. The inventory model group determines whether the item's costs reflect a standard cost or an actual cost inventory model.

2. Assign an item group to the purchased item. The item group contains ledger accounts that apply to the purchased item. The ledger accounts for an item with a standard cost inventory model include the purchase price variance, the inventory cost revaluation, and the cost change variance.

3. Assign the inventory unit of measure to the item. The item's costs are always expressed in the item's inventory unit of measure.

4. Assign a cost group to the purchased item. The item's cost group provides cost segmentation in the calculated costs of a parent manufactured item. The item's cost group can also be used to assign ledger accounts related to standard cost variances.

   The item's cost group serves an additional purpose when BOM calculations are used to calculate a suggested sales price based on a cost-plus markup approach, because profit-setting percentages can be assigned to the cost group.

5. Assign a BOM calculation group to the purchased item. The item's BOM calculation group defines applicable warning conditions so that a BOM calculation will generate warning messages about possible sources of calculation errors. For example, a warning message can identify a zero cost or zero component quantity for the purchased item.

   The BOM calculation group supports additional purposes, such as indicating when to treat a manufactured item as a purchased item, and the source of cost contribution data for the purchased item in BOM calculations with planned costs.