Updating the Standard Costs and Inventory Values

Once you have reviewed the calculated costs for the items, you can move them into the production cost record using the Update Production process (Cost Update/Revalue process page). For a purchased item, this process performs these operations:

  • Adds a new effective-dated entry to the production cost record.

    The costs added are the new standard costs associated with the cost type and version that you select.

  • Calculates the revaluation of inventory value for all items in stock.

You may want to run the Update Production process (Cost Update/Revalue process page) in report only mode. This enables you to determine the effects of proposed changes to inventory value.

Revaluing Inventory

Revaluing inventory is the process of updating an item's cost and accounting for the change in inventory value due to the change in frozen standard cost for the item. The process involves calculating the difference in inventory value, recording the difference, and updating the standard costs for the items. Once the system records the updated information, it can be posted to the general ledger through the normal transaction accounting cycle. Because the system bases the revaluation on a snapshot of the inventory, you want to ensure that the inventory value is as correct and accurate as possible to reflect the correct financial picture.

Prior to running the Update Production process (Cost Update/Revalue process page) to revalue inventory, you must:

  1. Put away all pending inventory in the appropriate storage areas using the Complete Putaway process (INPPPTWY).

    This includes all items received from vendors that require inspection, as well as any receipts from another inventory business unit. This ensures that the system can account for all inventory and can calculate and post the correct revaluation amount.

  2. Run the complete Deplete On Hand Qty process (IN_FUL_DPL) to ensure that the item's quantities at the business unit level match the item's quantities at the location level.

    You must issue all staged items in order for the system to complete the update for the quantity on hand.

  3. Run the Transaction Costing process (CM_COSTING) within the Cost Accounting Creation process to ensure that all transactions already created throughout the PeopleSoft applications have been costed.

    The transactions do not need to be posted.

  4. Prohibit material movement for the business unit by selecting the Prohibit Material Movements check box on the Inventory Definition - Business Unit Definition page.

    No inventory transactions should take place while the Update Production process (Cost Update/Revalue process page) is revaluing inventory. When it updates the standard costs, the system multiplies the change in standard cost by the quantity on hand for the item in each storage area. By prohibiting material movement, you ensure that the quantity on hand is accurate.

  5. Check the Process Monitor to ensure that no one else in the organization is running the Update Production process (Cost Update/Revalue process page).

    If you are updating all item costs within the business unit, you should not run two Update Production processes simultaneously.

Page Name

Definition Name

Usage

Cost Update/Revalue Page

RUN_CES5001

This process updates the standard costs and performs inventory revaluation.

Use the Cost Update/Revalue page (RUN_CES5001) to this process updates the standard costs and performs inventory revaluation.

Navigation:

Cost Accounting > Item Costs > Update Costs > Cost Update/Revalue > Update Production

Select the business unit, cost type, and cost version with which you want to update the standard costs. The status for the cost type and version type appears and must be set to Approved.

The distribution type automatically changes to the distribution type associated with the inventory revaluation transaction group, but you can change it or you can leave it blank.

You have three options for running this process:

Field or Control

Description

Report Only - No Updates

Displays the impact of the standard change without actually updating the costs and posting revaluation entries. Running this process in report-only mode gives you a preview of the financial impact of the standards change without affecting the current transaction costing or inventory valuation.

Revalue Inventory and Report

Updates the standard production cost record and calculates the change in all inventory values. Running this report enables you to analyze a specific item should a question arise regarding the revaluation.

Revalue Inventory - No Report

Updates all records discussed in this section but does not print a report detailing the changes.

When reporting, you can also select to print a summary report only or to save variance results. When you choose to run the update in report-only mode and save the variance results, you can review the revaluation results by viewing the Compare Cost Updates or the Cost Updates by Tolerance pages.