My boss, the owner of the company here, has tried to steer us towards "market value" costing and valuation.
It is a little tricky here because we are forced to deal with surcharges on metals like stainless steel and copper. --Bill -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] Behalf Of Kate Stanton Sent: Tuesday, August 28, 2007 9:56 PM To: [email protected] Subject: Re: [U2] Moving Average Cost Average cost is fraught. I don't think there is a way around the scenario: - 100 in stock @ $5 each average cost (value $500) - adjust all of them out (no effect on average cost) - receive 1 at $10, so average cost is now $10 each - adjust the 100 back in. Inventory is now worth $1010. We have a manufacturing system, which makes it easier to justify using the much cleaner standard costing system, although it is more acceptable to call it "standard replacement cost". Agree - if you are batch controlled, it is best to keep all the costs of every batch, so you can then report on actual cost. Trouble is, you should not try to keep valuation at actual, because invoices or other costs may not come in until well after the goods have been sold. Keeping the actual per batch means you can report on actual at a later date, once all the costs are in. If you use anything except standard (replacement) cost, and keep General Ledger asset accounts up to date, you have to post revaluation of inventory with every receipt. Messy. Trouble is, some accountants are uncomfortable with standard (replacement) cost, as they feel it is too complicated - they could not understand it at university, and now it looks hard. Pity, when good analysis of variances makes this a really good management tool! My 2 cents. ----- Original Message ----- From: "Brutzman, Bill" <[EMAIL PROTECTED]> To: <[email protected]> Sent: Wednesday, August 29, 2007 8:53 AM Subject: RE: [U2] Moving Average Cost > We have done a lot here recently with inventory valuations. > > Why care about "Moving Average Costs". Consider using receivers as lot > numbers and > do actual costs of what is there. > > We do our valuations on a monthly basis. If weekly or daily costs are > needed, consider saving this daily data to a little database. > > I guess that we could talk about it... > > --Bill > > 973.471.7770 x145 > > -----Original Message----- > From: [EMAIL PROTECTED] > [mailto:[EMAIL PROTECTED] Behalf Of Baker Hughes > Sent: Tuesday, August 28, 2007 2:33 PM > To: [email protected] > Subject: [U2] Moving Average Cost > > > Hey, > > I have a distribution/manufacturing question. Could some of you share > your formula for calculating Moving Average Cost. > > Consider: > > Assume you are receiving stock into the warehouse, and recalculating > your new average cost upon each receipt (which later serves as basis for > your cost-plus price quote, but that's immaterial to the formula). > > Since you also have negative stock movements (cycle count inventory > adjustments, or adjust quantities on- purchase receipts) should you not > use the absolute qty and absolute cost of the movement, when calculating > your moving avg cost? > > Formula A: > Extended.Cost.Rcpt = Qty.Rcvd * Cost.Ea > Total.Inventory.Value = (Qty.OH * Old.Avg.Cost) + Extended.Cost.Rcpt > Total.QOH = Qty.OH + Qty.Rcvd > New.Avg.Cost = Total.Inventory.Value / Total.QOH > > Ex. 1 - a positive Qty Received: > Extended.Cost.Rcpt = 10,000 * 2.8242 [28,242.00] > Total.Inventory.Value = (11,000 * 2.8215) + Extended.Cost.Rcpt > [59,278.50] > Total.QOH = 11,000 + 10,000 [21,000] > New.Avg.Cost = 59,278.5 / 21,000 [2.8227] > > Ex. 2 - a negative Qty Received (Adjusted): > Extended.Cost.Rcpt = -10,000 * 2.8242 [-28,242.00] > Total.Inventory.Value = (11,000 * 2.8215) + Extended.Cost.Rcpt > [2,794.50] > Total.QOH = 11,000 - 10,000 [1,000] > New.Avg.Cost = 2,794.50 / 1,000 [2.7945] > > > Formula B: > Extended.Cost.Rcpt = ABS(Qty.Rcvd) * ABS(Cost.Ea) > Total.Inventory.Value = (Qty.OH * Old.Avg.Cost) + Extended.Cost.Rcpt > Total.ABS.QOH = Qty.OH + ABS(Qty.Rcvd) > New.Avg.Cost = Total.Inventory.Value / Total.ABS.QOH > > With Formula B the new.avg.cost would be the same for both Ex. 1 & 2 > > TIA, > > -Baker > ------- > u2-users mailing list > [email protected] > To unsubscribe please visit http://listserver.u2ug.org/ > ------- > u2-users mailing list > [email protected] > To unsubscribe please visit http://listserver.u2ug.org/ ------- u2-users mailing list [email protected] To unsubscribe please visit http://listserver.u2ug.org/ ------- u2-users mailing list [email protected] To unsubscribe please visit http://listserver.u2ug.org/
