Costing Methods

The Order Processing application supports two costing methods:  standard and moving average.  The standard costing method allows users to establish a unit cost for parts.  When the actual price paid to a vendor consistently exceeds the unit cost, the cost should be revised or other vendors should be considered.  The moving average costing method automatically updates the unit cost field on the associated Warehouse Balance file record to obtain a new unit cost whenever the part is bought or sold.  For both costing methods, the shipment type may be either direct or warehouse.  Unit cost can be entered in the following Order Processing conversations:

The cost for parts is obtained from the Part Master or Warehouse Balance file at order entry time to check gross margins, and at shipping/billing time (stock only) to relieve inventory.

Stock parts may be costed by either a moving average or standard costing method; nonstandard parts may be costed on a moving average basis only.  Each company/warehouse can choose one costing method for its stock parts.  For example, company/warehouse 001/001 may choose to have all stock parts costed on a moving average basis, while company/warehouse 002/001 may want to cost its parts on a standard cost basis.

Related

• Implications to the Billing Conversation
• Payment Terms Code
• Display Cost Option
• Currency Considerations