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TOPIC: Switching to last cost from standard cost

Switching to last cost from standard cost #15

I am looking into changing for year-end, from standard costs to last cost - has anyone done this and if so, what kind of a time frame am I looking at and difficulty. Does anyone have any white papers on comparison of the two costing methods?
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Switching to last cost from standard cost #19

  • Anonymous
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Do you just want to update all your purchased items from standard to the most current "last" cost available? If that is the case, and you have been maintaining the current and last cost fields, you can simply do a "Multiple Process Selection" from your standard costing, processes menu.

Select the following fields:

Create cost master
Roll cost master
Cost buildup
Current to standard roll

Cost to update - current
Inventory cost to use - last
Purchased or mfg - purchased
Mfg method - all

This will update the cost of all your purchased parts from last year's current cost, to this year's last, most "current" cost. Then once you have done that, you can roll costs on all your mfg parts to incorporate the new purchase price into your standards.

If you are really switching all your inventory costs from standard cost to last cost, may I ask why? Also, this sounds like you have already gone through all the motions of calculating standard costs. So you have your BOM's and routers all in place? Do you have SFC installed and running? If so, I would appreciate speaking with you on some issues we are having.

We are in the implementation stages of SFC. We have BOM's and routers created. I have rolled costs and have a standard cost in place. We have not gone live yet.

Hope I was able to help. Let me know so I can dig for some more answers.
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Switching to last cost from standard cost #76


There are some major ramifications when changing your cost method in this manner. If you run shop floor control and manufacturing cost accounting, only the standard and average cost methods provide the proper distributions.

Last cost can also fluctuate widely. Average cost is a safer choice. Average cost uses a weighting based on the initial quantity in inventory multiplied by the existing average cost plus the received quantity multiplied by the last cost, with this total dived by the total quantity in inventory after the receipt.

Average cost also works well in production and shop orders.
Jeffrey Karp
Karp Consulting. Inc.
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"I help companies realize the value of Macola Software." Check my website for references, etc. at: www.karpconsulting.net
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Switching to last cost from standard cost #82

  • Kruegeme
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We have been modifing standard costs on purchased items as far back as I can remember. Our process is for purchasing to review on a monthly basis the average cost versus last costs in comparison to standard. Depending on how often you turn your inventory will determine how long it takes for your average cost to come close to your last cost. If you know for sure that you don't have any old material on hand then you can move forward more quickly. The main consideration here is what the change in standards would do to your stock status. If you make drastic standard changes it will have a dramatic effect on your stock status. Also, don't forget to roll your BOMs if you use them so that they update with the current standards otherwise you will start seeing hits to your variance accounts.
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