Average Cost to Standard Cost

epicor

(Lindsay Roberts-Stalcup) #1

The company that I work for attempted to switch from average cost to standard cost for finished goods earlier this year. They ending up determining that they were not ready to switch, but now we have a “mixed bag” in our setup of parts. Some parts are set at standard and some are set at average. We have been told by Epicor that when standard costing is used, average costs no longer calculate.

The company produces a lot of custom parts and lot sizes jump around a lot, so standard costing does not really seem like an ideal fit for the company. I am worried that if we continue to try to switch to standard costing for finished goods, we will lose our average costs. It seems like these average costs would be good to look at when standard costs are analyzed each year.

So, for those of you that use standard cost, how do you do your annual analysis to determine if standard costs are in line with where they should be at?


(Joshua Giese) #2

We use standard cost for GL purposes but we calculate avg for our own reports. It’s pretty easy to do at multiple points of the system. It’s really how does your CFO want the financials to shake out. For us std cost makes sense because though we make custom product there should be a level of predictability to it. It’s easier to know how profitable a job might have been when we can do est to act variance. With avg your est to act is a bit of a moving target.


(al maragni (USA - NY/NJ)) #3

i don’t remember for sure at 9.x , but i always believed …
.“Regardless of the primary cost method defined on the part record, the application maintains values for other
cost methods. For example, even though the primary cost method of a part is standard, the application updates
the average and last cost values on the part record as you receive parts.”


(Lindsay Roberts-Stalcup) #4

Regardless of the primary cost method defined on the part record, the application maintains values for other
cost methods

I am rather new to Epicor, but I was under that impression too. I have only been with this company for 8 months.

I started noticing a few months ago that for many of our parts, the average cost and the last cost are equal to the standard cost. For other parts, the average and last cost are continuing to update.

We had a call with Epicor support yesterday. They stated that when standard costing is used, average and last no longer calculate.


(Joshua Giese) #5

Al that is what the documentation seems to implicate but even since 9 I’ve never seen that to be the reality which is very disappointing it would be really nice if it did.


(Lindsay Roberts-Stalcup) #6

jgiese.wci, thank you for the replies. We make a lot of first run parts that are not profitable. Many of these parts are never made again. If they are made again, the lot size can be vastly different from the first run. To me, it seems like the standards are going to be very dependent on the lot size and we will have huge quantity variances all the time.


(Joshua Giese) #7

Yup… Can totally sympathize with that. We are in the same boat.


(Lindsay Roberts-Stalcup) #8

jgiese.wci, how often do you update your standards?


(Joshua Giese) #9

Yeah so about that… we haven’t since we went live in 2012. The reason being we don’t know how to do it in Epicor. There are fluid materials and printing plates that we don’t know how to include in Epicor from a cost standpoint, that is calculated in the standard cost. We need to put a concerted effort into how we want that to look, what we want included in the standard going forward, and what we want to accept in variance. Because we are missing stuff in our BOM we can’t use cost roll-up and because we can’t use cost roll-up the idea of manually checking our standards in our Excel model and updating each by hand seems insurmountable. I don’t know your constraints or model, but our’s is a work in process at the moment.


(Jenn Lisser) #10

Epicor maintains average and last costs only when you transact through stock. If you have finished goods shipping directly from a job it will not update the cost buckets.

We ship from jobs so those buckets aren’t updated. However, if we have a finished good come back on an RMA and we accept that to stock the bucket is maintained (you can override costs in the RMA disposition process, so good to know what is updating that bucket).


(Lindsay Roberts-Stalcup) #11

JennL, we receive everything into inventory and ship from stock. Epicor still doesn’t update average and last costs. If the part is set at standard, the average and the last cost are equal to the standard. We thought that maybe this was an Epicor bug, but we put in a ticket with Epicor and they ended up telling us that this behavior is normal.


(al maragni (USA - NY/NJ)) #12

Epicor does allow cost method assignment by part

is it possible you can try
assigning setting up FirstRun parts - as AVG cost - to eliminate variances, then
once the mfg method reaches a steady state - you can convert the part to standard.


(al maragni (USA - NY/NJ)) #13

oh boy, that is a nice, meaty, cost accounting challenge… :slight_smile:


(Lindsay Roberts-Stalcup) #14

Good thought, but the CPA side of me says that using two costing methods would be frowned upon.


(al maragni (USA - NY/NJ)) #15

for sure, i am not a CPA
i expect the key idea is to be consistent over time with how items are costed


(Lindsay Roberts-Stalcup) #16

I really don’t want to use standard costing, but the owners of the company do :frowning: