Costing method

sedma

Hi,



a client wants to use actual costing for manufacturing, with average method when cogs is calculated.



I can't use average method since scrap (material variance) is not registered on average. Which costing method should I use?

Alex_Chow

When you manufacture (output), the cost is the actual cost. The costing method only applies when you take inventory out (consumption, negative adjustment, sale, etc).

When you take material for scrap, it will be registered using Average Cost.

Kappa

If you want to register Material Variance then it is per definition not possible to have an average method for COGS: you only register Material Variance with standard costing, so COGS will always be the same for that item as long as you don't change the standard costs. In this scenario I would however suggest to implement the Average Cost and make a report for Material Variance on other data. Instead of value entries, you could make a report on basis of the material lines and the difference between quantity consumed and planned quantity.