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Costing Methods

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JODAMORE
Basic Member
Posts: 10
Basic Member
10/2/2017 6:07 PM

    I have entered an org that has utilized Standard Costing Method for over a decade.  STD takes quite of bit of maintenance, and I was hoping to use Average... but Im concerned with what I am giving up in the swap.

    STD Cost requires an entry in every IC12 and IC81 loc, which we have TONS of... which makes maintenance a nightmare.

    However, AVG is an unknown to me.  It doesn't capture price changes effectively near as I can tell.  EX: Item ordered for 100 for 5 years, then price change to 50 recently, yet average would take a long while to even out?

    LIFO, the most recent receipt should be cost used.  Why would you charge newest out over oldest? 

    FIFO.  Using the first (oldest receipts?)  Guess I don't get the idea.  I suspect its monitoring your inventory in and out, and if you bring in 50 items as a 1, but the next 50 as 10... It will issue out the first 50 as a 1.  Is that accurate?

    I'm always skeptical on Lawson language, and I want to ensure I understand the scope of all choices. 

    Anyone have advice on the best option?

     

    David Williams
    Veteran Member
    Posts: 1127
    Veteran Member
    10/2/2017 6:18 PM
      Regardless of costing method, the system should track the cost for your items without you having to add it to IC12 or IC81.
      Average cost does apply price changes to all of the items in stock so if you had 100 widgets at $10 and bought another 100 at $9.00, the cost would average to $9.50 each for all 200.
      David Williams
      Kat V
      Veteran Member
      Posts: 1020
      Veteran Member
      10/30/2017 6:07 PM
        In Lawson, AVG cost doesn't run for all time, it runs for the length of the current SOH. So every time you run out of stock, it will also zero out the cost. If you run down to 1 EA @ $1 and then bring in a box of 100 EA @$2 EA, the AVG will be $1.99. The next box that comes in is back up to the $2. The only place it can get extreme is if you are carrying high dollar items - we have some IT products in stock.

        We have a sql running that alerts our warehouse managers whenever an item's average cost is over/under 5% of the true cost and it's on the report center so they can see all differences regardless how small.

        It's designed to help smooth out the cost increases so we don't spike up or down and is more forgiving of input errors. When something is completely wrong, it is the same process AVG or Standard. We back out all stock and bring it back in at the correct cost.