Standard Costing Workflow
The following is the standard costing workflow:
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To use standard costing with inventory and assembly items, enable the Standard Costing feature. For more information, see Enabling Standard Costing.
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Create Cost Categories.
Cost categories are used to classify the type of inventory item so that you can categorize manufacturing variances. For standard costing, set up cost categories and assign them a material or service cost type. For more information, see Creating Cost Categories.
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Configure Item Records.
On item records, select standard cost as the costing method for assembly items and inventory items. When an item uses standard costing, variances are generated based on differences between the item fixed and actual costs. You can also select a standard costing method for lot or serial numbered items. For service items and inventory items, assign a cost category to help identify variances. For more information, see Setting Up Item Records for Standard Costing.
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Define Cost Versions.
If you expect standard costs to change over time, or costs to vary based on location, you can establish multiple cost versions. For example, if costs change quarterly, you can establish four cost versions establishing standard costs for each quarter. For more information, see Defining Cost Versions.
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Set up Standard Costs.
For each cost version, enter the standard cost for inventory items in a planned standard cost record. This record stores the expected cost of inventory items. This expected standard cost is used to calculate variances from the item cost. For more information, see Entering Planned Standard Cost Records.
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Roll up Standard Costs to calculate the total cost of assemblies.
The cost roll up calculates the total fixed cost of assembly and sub-assembly items based on data entered on the planned standard cost record. The planned standard cost record is sourced to find the cost of individual component items for assemblies. The cost of each member and sub-assembly is rolled up to calculate the total cost of the assembly. For more information, see Standard Cost Rollup.
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Revalue Inventory and update standard costs.
Revaluing inventory updates the standard cost of items and identifies the effective cost date.
Revaluation can be run using the following methods:
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As a bulk process using existing cost version records.
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Entering new costing data manually.
This process also runs an inventory revaluation which reviews your inventory and revalues it based on current standard cost changes. For more information, see Revalue Standard Cost Inventory.
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When you Enter a Transaction, general ledger lines post variance to the appropriate accounts based on the differences between the actual and standard costs. For more information, see Standard Costing and Transactions.