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Manufacturing & Average Costing Method
Giancarlo
Member Posts: 11
Hello experts:
I know it's not a recommended practice to use avg with Manufacturing; and that it may be hard to later on track the total cost of producing an item.
I assume that there will very likely be a ton of Adjustment entries making it a nightmare to track.
I have heard that I should advice the company to consider using FIFO instead (I am contemplating this)
There are people out there who are successfully using Average in manufacturing.
However, this specific company I'm implementing is not ready to handle the Standard Costing method and is pushing for Average.
They have decided to use this Costing Method because they think it will be easier to handle the operations of their manufacturing process with minimal input.
2 questions before I make any costing method recommendations.
1. Why is it so hard to later analyse the value entries, and manually calculate the total cost of production? (is it only adjust cost entries)?
2. Does FIFO also use the Average costing calculations and posting methods to value the Finished Good?
(Note: They will not be using any machine centers, only work centers... very limited capacity entries)
Please share your opinion. Thanks.
I know it's not a recommended practice to use avg with Manufacturing; and that it may be hard to later on track the total cost of producing an item.
I assume that there will very likely be a ton of Adjustment entries making it a nightmare to track.
I have heard that I should advice the company to consider using FIFO instead (I am contemplating this)
There are people out there who are successfully using Average in manufacturing.
However, this specific company I'm implementing is not ready to handle the Standard Costing method and is pushing for Average.
They have decided to use this Costing Method because they think it will be easier to handle the operations of their manufacturing process with minimal input.
2 questions before I make any costing method recommendations.
1. Why is it so hard to later analyse the value entries, and manually calculate the total cost of production? (is it only adjust cost entries)?
2. Does FIFO also use the Average costing calculations and posting methods to value the Finished Good?
(Note: They will not be using any machine centers, only work centers... very limited capacity entries)
Please share your opinion. Thanks.
0
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