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Evo-ERP and DBA Classic >> Items >> Inventory Value and Average Cost
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Message started by dforten on 09/03/08 at 06:54:39

Title: Inventory Value and Average Cost
Post by dforten on 09/03/08 at 06:54:39

I am concerned that part of the monthly steps I do is causing our inventory value to be overstated and I am looking for what others do as part of their end of the month routine. I run IN-L-K rept to see what our last cost was on purchased items. Then I change the standard to match the last cost in IN-L-E. I run the BM-G std cost rollup so that at the beginning of each month, we are seeing what our standard costs is with all of our price increases from the previous month ( Which has been crazy lately!). I then run UT-K-F and change the avg and last costs on all our pn's to match what the standard is and this recalculates the on hand inv. value. Am I overstating my inventory value by changing the average to last?

Exp - Had 55 pcs. of a part that we purchased for 14.50 several months ago
Recd another 300 pcs. that we just recd in Aug. for 17.50 - After I am done with all my month end steps, the inv. value for this part is in at 6212.50 (355 x 17.50) I have lost the fact that 55 of these s/b in inv. at 14.50 ea??
This same thing is happening on Finished goods items we manf - Once I run all the steps, production parts that were made 3 months ago at a lower cost, has now been recalculated to the current standard cost in inventory value.

Should I not be changing the average cost to match standard??

We use FIFO and standard costs when entering finished prod.

Title: Re: Inventory Value and Average Cost
Post by GasGiant on 09/03/08 at 08:06:28

You should skip the last step (UT-K-F). Last and standard will already be the same and that is going to give you good cost projections. If you change the average you are basically telling accounting that you paid a different price than the actual purchase or WO price. In a time of rising prices you are raising the value of your inventory. GAAP says the lesser of cost or current market value is how you carry inventory... except that...

You say you are using FIFO, so that may mean your system is not even using the average for costing. I'm clueless on that part of it, but the inventory value is just UOH x Avg cost.