Standard Costing

Standard costs are predetermined costs for inventory items based on raw materials prices and costs to manufacture finished products under normal conditions. Some manufacturers prefer to use standard rather than actual costs when accounting for the value of their inventory to minimize the effect of fluctuations in material costs, and actual manufacturing operations on the cost basis of their inventory. Opentaps can support using standard rather than actual costs for inventory management.

To configure using standard costing, configure the costingMethodId of PartyAcctgPreference to STANDARD_COSTING when setting up your organization's accounting preferences costing. This will cause opentaps to do the following:

1. When inventory is received on the Receive Against PO screen, the value of the inventory items will be the standard cost of the products, rather than their prices on the purchase orders.
2. When inventory is received on the Receive Inventory Item Screen, it will automatically default to the standard cost of the product, regardless of your costing method.
3. When you are ready to complete a production run on the View Production Run screen, it will receive the finished goods into inventory at standard costs rather than the actual cost to produce them based on the time and materials required. The difference between the standard cost and the actual cost will be charged off to a cost variance account when the production run is closed.
4. You can use the Adjust Inventory Values screen to do a "cost roll," where you can change the value of the inventory items to their new standard costs.

To enter and update the standard costs of your products, go to the Catalog Manager, find your product, and click on the [Costs] tab.

If you have standard cost configured for your organization and your product has standard costs defined as well, then you can receive the product before it is completed during a production run. The product will be received into inventory at its standard cost, and the reconciliation of standard versus actual manufacturing cost will occur when the production run is completed.

See also: Standard Costing Tests