Costing Methods
Agenda
Overview of Costing Methods
OPM calculates the average cost for the period while moving previous period's cost with last period's inventory balance and cost:
PMAC is calculated by dividing the result of -- the quantity of the prior period inventory balance multiplied by the prior period cost, plus the sum of the transaction quantity multiplied by price -- by the prior period inventory balance plus the sum of transaction quantity, as shown in the following illustration.
Where: Prior Period Inv Balance - This is the prior period inventory balance. Prior Period Cost This is the prior period actual cost. Trans Qty - Receipt Transaction Quantities within the costing period.
Price - Receipt estimated prices or AP invoice final prices within the costing period.
PMAC (Example)
Where;
Trans Qty - Receipt Quantities from the start of the costing calendar to the end of the current period. Price - Receipt estimated prices within the costing calendar.
PPAC (Example)
Where: Trans Qty is Receipt Quantities or AP interfaced quantities within the costing period Price - Receipt estimated prices or AP invoice final prices within the costing period
PWAC (Example)
Cost Components
Material Cost Resource Cost Overheads Cost Cost Allocated through GL Expense Allocations. Invoice Price Variance Exchange Rate Variance Unit Cost Adjustments
Example
Resource Cost can be used to track cost of a particular resource Cost Allocated though GL Expense Allocation will include;
Salaries Basic Overtime Cash Benefits
Retirement Benefits
Insurance Depreciation Natural Gas - Fixed charges PFL Foreign Eng./ Tech Maintenance Stores & POL Hired Labour Travelling
Delivery to Stock:
Inventory Account-Dr. Inventory receiving account-Cr.
Offset Account
Offset Account
WIP
Resource charging
Journal Line Type RCA Debit Credit [Actual Ingredient Input Qty x Batch Organization Total Item Cost] [Actual Ingredient Input Qty x (Organization Item Total Material Cost)]
WIP
Completion entry
Journal Line Type INV Debit [Actual Product Output Qty x Organization Total Item Cost] [Actual Product Output Qty x (Organization Item Material Cost + Organization Item Resource Cost)] Credit
WIP
OVH
ALC
CAD
CAD
INV
Debit
Transaction Qty x Item Cost
Credit
Deferred COGS