Standard Costing

fishernt

I am having a problem with standard costing regarding volume discounts.

I can buy 10 pieces of Part A for $10.00 each. But I can also buy 1000 pieces of Part for $1.00 each.

We are an contract manufacturer and each order we receive varies in size.

How do I set my Standard cost for the item so that I don't incur huge variances?

Also how does Navision value inventory? If it uses the Standard cost this will greatly affect my inventory value.

We are just in the process of implementing Navision, so I am just learning.

AdamRoue

Navision values the inventory depending upon the costing method. Can you tell me why if you can have an item cost of $1 or $10 and you do not want huge variances you are using standard costing? Standard costing is all about variances, and the value is based on the standard cost, it is the point of standard costing. Have you looked at FIFO?

themave

AdamRoue wrote:

Navision values the inventory depending upon the costing method. Can you tell me why if you can have an item cost of $1 or $10 and you do not want huge variances you are using standard costing? Standard costing is all about variances, and the value is based on the standard cost, it is the point of standard costing. Have you looked at FIFO?

ditto, you should not be using standard cost.

if you insist on Standard cost, then you need to come up with a formula you can justify to get your standard cost.

Basically you need to come up with your projected average cost, and use that as the standard cost. then through out the year as you buy the large volumn vs the small lot your total variance will appoach zero.

but if you are going to do that, you might as well just use average cost in the first place.

darshanm

Themave is right,

you should not use standard costing method. When you use
standard costing method system copies the Unit cost on Item card
(equal to the Stnd Cost) in Purchase line OR sales line. Posts the
entry in value entry table with the rate in Unit Cost field of Sales/Purchase
line field.


Insted you can set costing method to FIFO/LIFO/Average