Costing Methods

One of two costing methods may be used to value parts in the system:

STANDARD (S) - All transactions for a part are valued at a set standard cost.  Standard costs are established at the beginning of a period, then revised at the beginning of the next period as needed.  Variations in cost within the period are charged to variance accounts. 

MOVING (M)- The average unit cost for a part is the AVERAGE calculated by the system each time the inventory balance changes. 

Costing methods may be assigned at the part or part/warehouse level. 

• Parts will be costed using standard costs if they are stored in a manufacturing warehouse. 
• Parts with a part type of Non-Standard (7) will be costed using the moving average method, regardless of the warehouse in which they are stored. 
• Inventory will not be valued for parts that are defined with part type of Reference (5), regardless of the warehouse in which they are stored. 
• If a part is stored outside of a manufacturing warehouse, and if it has a part type other than Reference or Non-Standard, the costing method is based on the Costing Option as defined on this screen for the warehouse.  This option may have the value of Standard (S) or Moving Average (M). 

ASSIGNING COSTS - MANUFACTURING WAREHOUSES.  The unit cost is carried on the Part Master.  Material costs for purchased, raw material, transfer, non-stock, and by-product parts are entered for the part (using Part Master Maintenance). Costs for manufactured parts may be entered for the part (using Part Master Maintenance), or may be generated for manufactured parts (and transfer parts, if they have a bill of material and routing in this plant/company/warehouse) using the Design Engineering module's Product Structure Maintenance, the Manufacturing Engineering module's Routing Maintenance, and the Product Costing module's Cost Generation programs.  The generated costs are based on the material costs of non-manufactured components and the labor and overhead costs of manufacturing processes. 

STANDARD DISTRIBUTION WAREHOUSES.  The unit cost is carried on the warehouse balance record for the part. For a given part, a unique standard cost may be defined at each warehouse.  The unit cost may be modified using the Warehouse Balance Maintenance conversation (Fast Path code 0414) or the Inventory Adjustments conversation (Fast Path code 0516) in the Inventory Control module. 

MOVING AVERAGE COSTED WAREHOUSES.  (For Non-Standard or moving average warehouses.) The initial cost may be specified when the warehouse balance record is created (using Warehouse Balance Maintenance) and may be modified using the Inventory Adjustment conversation in the Inventory Control module.  The average cost is recalculated automatically:

• when inventory is received against a purchase or transfer order, based upon the purchase price or transfer order price charged to this warehouse by the transferring warehouse. 
• when inventory is transferred from another warehouse (via Stock Transfer conversation), based upon the unit cost of the part in the transferring warehouse. 
• when inventory is shipped to a customer, based on the unit cost of the part. 
• when inventory is adjusted and the user specified a cost or value for the adjusted inventory.