# Internal categories

Category hierarchy fields and cost allocation method options.

Source: https://support.toolingmetrics.com/en/inventory/reference/internal-categories/
Updated: 2026-10-29

**Internal Categories** organize inventory items into a tree structure and are the primary vehicle for configuring cost allocation. See [Cost Allocation](https://support.toolingmetrics.com/en/inventory/overview/cost-allocation/) for why the methods exist, and [Configure usage costs](https://support.toolingmetrics.com/en/inventory/guides/configure-usage-costs/) for setup steps.

## Fields

| Field | Description |
|---|---|
| **Name** | Category name (e.g., *Indexable Inserts*, *Solid Carbide End Mills*, *Hydraulic Chucks*). |
| **Parent Category** | Parent in the tree. If blank, this is a root category. |
| **Usage Costing Method** | The cost allocation method for items in this category. Required on a root category; optional on a child category — see below. |
| **Usage Rate** | The numeric parameter for the selected method (flat rate amount, or percentage rate). Required on a root category; optional on a child category. |

## Cost allocation methods

| Method | Usage Rate Meaning | Posts |
|---|---|---|
| **Fixed Rate** | Flat amount (in base currency). | Once per pick to a machine. |
| **Unit Cost x Usage Rate** | Decimal percentage of the item's current unit cost (e.g., `0.02` = 2%). | Once per pick to a machine. |
| **Purchase Price x Usage Rate** | Decimal percentage of the item's purchase price. The posted amount is capped at the unit cost. | Once per pick to a machine. |
| **Usage Time x Usage Rate per Hour** | Amount per hour (in base currency). | Automatically once per day, for each hour the item remains on a machine. |

The Item form lists the same four methods as **Fixed Rate**, **Unit Cost x Usage Rate in Percentage**, **Purchase Price x Usage Rate in Percentage**, and **Usage Time x Usage Rate per Hour**, plus a blank option, **Following categorical hierarchy**, that keeps the item inheriting from its category.

## Inheritance

Usage Costing Method and Usage Rate resolve up the category tree, each on its own:

- A root category (no Parent Category) must set both.
- A child category can leave either blank. A blank value is taken from the nearest ancestor category that sets it.
- An Item set to **Following categorical hierarchy** uses the method its Internal Category resolves to, and an Item with a blank Usage Rate uses the rate its category resolves to.

Item-level values always win over category values.