Setting Up Average Costing
Average Rates Cost Type for Average Costing Only
• You initially define resource rates, overhead rates, material overhead rates or amounts, and outside processing rates in an average rates cost type.
• In your inventory organization parameters, you designate one of your user defined cost types as your average rates cost type.
• The system uses those rates to cost transactions from that point in time forward until you change or update them or use a different average rates cost type.
Use the Organization Parameters window to enter:
• The costing method as average
• The average rates cost type which is your user defined cost type that holds your average resource and overhead rates and material overhead rates or amounts.
(N) INV Setup > Organizations > Parameters (T) Costing Information
Use the Cost Types window to create: • Your user defined cost type that holds your average resource and overhead rates and material overhead rates or amounts
(N) CST Setup > Cost Types
Item Cost Controls
• The control level determines how item costs are maintained within an Inventory organization.
• The control must be set to “Org level” as you cannot share costs.
Elemental Costs During Interorganization Transfers
• You can choose to transfer costs from the sending organization to the receiving organization as individual elemental costs or to summarize them into the material element.
• You use the Shipping Network window to set the flag that determines whether costs transfer elementally or as a summary.
• When you select the Elemental Visibility Enabled check box for a specific shipping network setup, all the interorganizational transactions from the shipping organization to that specific receiving organization will be stored with elemental cost information.
• When this check box is cleared, all the cost will be summed to this level of material cost.
Set the flag that determines whether costs transfer elementally or as a summary
Average Cost Update
You can use the average cost update to:
• Adjust your average costs easily. You need to have a non-zero onhand quantity for the average cost update to have any effect.
• Enter additional costs, such as freight or invoice price variances, or correct your average costs as required.
To a new average unit cost:
• You enter the new cost by cost element by level in a single update session, and the new total unit cost will be automatically calculated.
• You enter a new total cost, and the amount of change will automatically be spread across all cost elements and levels in the same proportion as they existed before the update.
By a percentage change:
• You select cost element(s) and level(s) to adjust up or down, and the new total unit cost will be automatically calculated.
• You adjust the total, and the percentage change will automatically be applied to all cost elements and levels.
By a change in inventory value:
• You select cost element(s) and level(s) to be adjusted or adjust the total, and the system will revalue onhand inventory by that amount and recalculate the average cost of the item.
The average cost update affects the cost of:
• Items in all asset subinventories in your organization.
• Inventory intransit that is owned by your organization.
The average cost update will not revalue:
• Components and assemblies in WIP
• Expense items • Items in an expense subinventory
• You post the revaluation offset to Average Cost Adjustment Accounts, which you specify when you perform the average cost update.
• In an individual update session, you can make changes by cost element, choosing one, several, or all cost elements.
Note
• Under average costing, the system automatically and perpetually keeps unit costs current.
• You use the average cost update to routinely update your costs to include invoice price variances.
• Otherwise, you should use the average cost update feature sparingly for corrections.
Use the Update Average Cost window to enter:
• Details about your cost update
• A default to use as the percentage change for individual item costs if you are updating costs using a percentage change
• An item for which to update average cost
• A new average cost
• A new onhand inventory value, performed for the item at a summary level or for individual cost elements by level.
(N) CST Item Costs > Average Cost Update > Update
Average Rates Cost Type for Average Costing Only
• You initially define resource rates, overhead rates, material overhead rates or amounts, and outside processing rates in an average rates cost type.
• In your inventory organization parameters, you designate one of your user defined cost types as your average rates cost type.
• The system uses those rates to cost transactions from that point in time forward until you change or update them or use a different average rates cost type.
Use the Organization Parameters window to enter:
• The costing method as average
• The average rates cost type which is your user defined cost type that holds your average resource and overhead rates and material overhead rates or amounts.
(N) INV Setup > Organizations > Parameters (T) Costing Information
Use the Cost Types window to create: • Your user defined cost type that holds your average resource and overhead rates and material overhead rates or amounts
(N) CST Setup > Cost Types
Item Cost Controls
• The control level determines how item costs are maintained within an Inventory organization.
• The control must be set to “Org level” as you cannot share costs.
Elemental Costs During Interorganization Transfers
• You can choose to transfer costs from the sending organization to the receiving organization as individual elemental costs or to summarize them into the material element.
• You use the Shipping Network window to set the flag that determines whether costs transfer elementally or as a summary.
• When you select the Elemental Visibility Enabled check box for a specific shipping network setup, all the interorganizational transactions from the shipping organization to that specific receiving organization will be stored with elemental cost information.
• When this check box is cleared, all the cost will be summed to this level of material cost.
Set the flag that determines whether costs transfer elementally or as a summary
Average Cost Update
You can use the average cost update to:
• Adjust your average costs easily. You need to have a non-zero onhand quantity for the average cost update to have any effect.
• Enter additional costs, such as freight or invoice price variances, or correct your average costs as required.
To a new average unit cost:
• You enter the new cost by cost element by level in a single update session, and the new total unit cost will be automatically calculated.
• You enter a new total cost, and the amount of change will automatically be spread across all cost elements and levels in the same proportion as they existed before the update.
By a percentage change:
• You select cost element(s) and level(s) to adjust up or down, and the new total unit cost will be automatically calculated.
• You adjust the total, and the percentage change will automatically be applied to all cost elements and levels.
By a change in inventory value:
• You select cost element(s) and level(s) to be adjusted or adjust the total, and the system will revalue onhand inventory by that amount and recalculate the average cost of the item.
The average cost update affects the cost of:
• Items in all asset subinventories in your organization.
• Inventory intransit that is owned by your organization.
The average cost update will not revalue:
• Components and assemblies in WIP
• Expense items • Items in an expense subinventory
• You post the revaluation offset to Average Cost Adjustment Accounts, which you specify when you perform the average cost update.
• In an individual update session, you can make changes by cost element, choosing one, several, or all cost elements.
Note
• Under average costing, the system automatically and perpetually keeps unit costs current.
• You use the average cost update to routinely update your costs to include invoice price variances.
• Otherwise, you should use the average cost update feature sparingly for corrections.
Use the Update Average Cost window to enter:
• Details about your cost update
• A default to use as the percentage change for individual item costs if you are updating costs using a percentage change
• An item for which to update average cost
• A new average cost
• A new onhand inventory value, performed for the item at a summary level or for individual cost elements by level.
(N) CST Item Costs > Average Cost Update > Update
