Standard Costs debate

Mauddib

Whats everyone feeling on standard costs here? What issues have you come accross in your company or from your clients in relation to these. Deciding on them, reporting against them etc etc.

Adux

Mauddib wrote:

Whats everyone feeling on standard costs here? What issues have you come accross in your company or from your clients in relation to these. Deciding on them, reporting against them etc etc.

For Manufacturing companies - yes yes yes ....

Mauddib

Well of course yes, but I mean in each persons company what issues have they come accross. I know its a big problem in just about all manufacturing companies. But Im curious to hear each persons story of how the dealt with it and where the biggest issues were.

bbrown

I have been work with Navision since 1999. I worked with a number of other systems for better than 10 years before that. I could probably count the number of sites using standard costing on one hand.

I find that standard cost in manufacturing works okay in the following curcumstances

1. When there is little or no variance in raw material cost during the year.

or

2. Raw materials are purchased and invoiced, production is run, and finished goods are sold within the same period. This way purchase price variances are not carried across periods.

Mauddib

So tell me about the alternatives that you have seen.

bbrown

FIFO tends to be the most comon costing methid used.

song

It does not update the usage variances, capacity and overhead variances even the production is set to Finished when there are still open invoices. This should not apply for when we set the Costing Method to Standard since this should look at the standard costs and not the actual costs.

themave

When using standard cost, navision should bring the standard cost into sales orders, purchase orders ect. but instead it brings "last direct cost in po's and average cost in sales orders. this eventually gets straighten out when you run adjust item cost routines.

But all your documents do not have the proper cost when they are originally entered.

Geert_Penners

bbrown wrote:

FIFO tends to be the most comon costing methid used.

I tend to disagree: in my ten years of implementing ERP manufacturing software almost every company used standard cost. The most compelling reason is that it offers much more financial insight.

Bbrown has a point though, that when the raw materials cost varies a lot, then maybe FIFo is better.

It kinda depends on the type of business the company is in.