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Evo-ERP and DBA Classic >> Accounting >> Purchase Price Variance
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Message started by tbolick on 01/26/07 at 11:55:10

Title: Purchase Price Variance
Post by tbolick on 01/26/07 at 11:55:10

We purchase a good portion of our items used for refurbishing, therefore we never know what we will end up paying for them.

We just converted to standard costing to keep the cost of items from changing after every PO.

Now we get journal entries of Purchase Price Variances after every PO. We want the GL to simply register the actual cost, but not continually update the cost of the item in Item Inquiry. How do you suggest we do this???

Title: Re: Purchase Price Variance
Post by David Waldmann on 01/26/07 at 13:35:35

You can't have your cake and eat it too.

I think the way I would do it (not necessarily understanding the intricacies of your needs) would be to not receive the PO unless you have the actual price. That will keep the GL clean. As for the cost in IN-A, since you are maintaining a Standard Cost, don't look at the history of PO Receipts or Transactions, just look at Standard Cost.

Maybe I don't understand exactly what the problem is.

Title: Re: Purchase Price Variance
Post by tbolick on 01/26/07 at 16:13:20

As an example:

Item A has a Standard cost of $10. We expect to pay around $10 for one of these items.

We find some for sale in a lot that we can get for a net of $5 each, so we buy 100 for $500.

The GL should show Cost of Inventory gets $500. The Item should continue to show a Std Cost of $10, since the next batch may cost $12 each, or $8, or whatever we can get it for. Also, we may have to throw away 20, or they may send us 120 for that $500. What I don't want is a GL entry for that $5 variance. Otherwise we will end up a GL entry for nearly every item we receive.

Basically, we are not worried about our inventory valuation on an item by item basis. We want to do costing "by the seat of our pants" and not have the system recalc it every time or create a GL entry every time. I think the PP Variance should be an option.

And I'd consider a mod for this ability, if I had to.

Title: Re: Purchase Price Variance
Post by David Waldmann on 01/29/07 at 04:24:24

It sounds to me like you should be using Average or FIFO costing then.

You can still have Standard Costs for comparison, and to be used in Estimating or to roll-up total Standard Costs even when you use Average Cost.