The purpose of Standard costing items is actually somewhat different that what you quoted below. According the the Accpac Plus IC documentation, if you use Standard costed items, the Standard Cost is what actually is used for the Cost of Sale. The Cost of Sale is what really defines the actual cost of the sale. For this type of item, the Most Recent Cost is only used in the updating of the Inventory control account for GL, to balance against the posted Receipts for the items.

If you print out the Invoice Audit List in OE after performing Day End Processing, you would see 10.00 in the Cost of Sale column, based on your examples below. The GL account being updated with the 10.00 is actually the Cost of Sale account as entered on the Control account set defined for the item. The GL account being updated with the 12.00 or 8.00 is the Inventory control account as defined in the IC Company Profile.

Note also that for Standard costing items, there is a Variance account that is being posted to with actual values and not simply a 'guestimate difference'. If your ledger is to balance at the end of the day, the only justification for this sort of posting to a variance account is that the Cost of Sale is different than the Inventory account update.

Therefore, I would disagree with your assertion that Sales Analysis is picking up the wrong cost from OE. It is the Cost of Sale that Sales Analysis wants, not the Inventory control change. If you really wanted the Cost of Sale to be calculated based on the Most Recent Cost of the item, rather than the Standard Cost, then you should have set up your items using the Moving Average costing method instead. This type of costing method ignores the Standard Cost in calculations, but you still can use it for comparison purposes. The Most Recent Cost is used for determining both the Receipt costs and the Cost of Sale.

Regards,

Sorry, I agree with our Technical Support department (and would add that in 15 years of shipping this product, no-one who has selected "Standard Cost" for their inventory has requested that Sales Analysis pick up the average cost).

Why not change the costing method from Standard to Moving Average? It is a single entry change in "Add/Modify/Delete Control Account".

When the first machine is sold the cost of sale results of different costing methods would be:
Weighted moving average - $525,000
FIFO - $500,000
LIFO - $550,000
Standard Cost - $600,000
User Specified cost - anything the user assigns.

The difference between average cost and the cost assigned to the sale must be accounted for in some way. In the LIFO, FIFO, and Weighted Moving Average costing methods, the remaining cost rremains assigned to inventory. So the sale of the second item results in:
Weighted moving average - $525,000
FIFO - $550,000
LIFO - $500,000

But under standard costing - $600,000 is also the cost of sale of the second item. This is clearly more than the total inventory value. But it must be accounted for.
The difference is sent to G/L as a cost variance. This variance credits expense for the value over and above inventory value that has been assigned as cost of sales. It assumes that other expenses are now being re-assigned as costs of sales.

In each and every case Softrak Sales Analysis would record the actual cost of sale assigned by ACCPAC.

Standard costing method is used to allow for assignment of costs not included in the inventory value. These might include freight, labor, storage, assembly, packaging, sterilization - all legitimate costs of the sale not included in inventory. Consider the following examples.

A manufacturer of the inserts for ball point pens would not find it economical to use manufacturing software to track the plastic, metal, and ink used and the hundreds of thousands of items produced in a day. Instead he would use overall purchases divided by how many thousands were made to calculate a standard cost, and monitor and change that cost periodically to reflect changes in the cost of raw materials.

A distributor of packing cartons is required by his customers to keep stock on hand so he can deliver to them at a moment's notice. The bundle that sells for $100 has a cost of sale that includes not only the bundle of cartons ($55) and the incoming freight ($1.00), which can be tracked through inventory, but also storage costs (1.25) and delivery costs (2.75), which are not even available until the time of sale. So he records the storage and delivery costs as expenses when the invoices from the public warehouse and the delivery service are received. He assigns a standard cost of $60. When the bundle is sold inventory is decreased by $55. The cost variance of $5 is a credit to expense that offsets the expenses already recorded, because these expenses are included in the cost of sales. Now he can calculate sales commissions on the real profit of each sale, which is $40, not $45.

Only when Standard Costing is not used as a costing method can the field "Standard Cost" be used to hold a benchmark value. Standard costing method may be the hardest to administer because it requires periodic review and adjustment of the value assigned based on the true total costs.
Manufacturers commonly use standard costing and manufacturing software typically includes provisions for tracking and recalculating costs in several ways to provide the information required to intelligently update the Standard Cost values.

If you find that commissions are being skewed by using this method, I would suggest that weighted moving average might be a better costing method for you to use.

quote:

---

Our financial statement (GL) reports the cost of sales based on Actual Cost even if we are using the Standard Cost Method

---

quote:

---

BUT THE SR THAT IS DESIGNED FOR THE JOB IS REPORTING THE COST OF SALES BASED ON STANDARD COST THAT IS DIFFERENT COMPARED TO THE ACTUAL COST IN THE GL

---

Sales Analysis is designed to take the value from the Cost of Sale column on the OE Invoice/CN Audit list. I don't believe it was designed to match the IC Control GL account.

The reason for the Cost Variance account is so that your GL will balance at the end of the day. If the unit cost of your item (from Average Unit Cost) is different than the Cost of Sale, the GL would be out of balance without the Variance making up the difference.

If Sales Analysis were to use Variance in it's cost calculations, the net result would be that it's reading the IC Control Account (AP Clearing) to designate the Cost of Sales. I would argue (and would welcome other's opinions as well) that the Cost of Sale does not necessarily have to equal the IC Control account amount. Otherwise, why would Accpac IC even allow a costing method that would generate different amounts?

Also, Accpac IC has a costing method (User-specified Cost), that allows you to enter ANY value for the cost, and this value gets posted to the Cost of Sale and IC Control accounts. There is no provision for this having to equal the Actual cost based on the Average unit cost. Why would Accpac Plus IC allow this method if it was a requirement for the Cost of Sale to equal the Actual Cost?

Because of the flexibility in choosing from 5 different methods, I think it's important that the correct choice is made when setting up inventory. From the information posted, you really wanted to use the Actual cost for determining the Cost of Sale, for commission calculation and relating to the GL. For this reason, the Moving Average method would have been best for you.

Because of the the issues involved with changing the costing method from Standard Costing to Moving Average, the only other solution I see is to edit the items and set the Standard Cost to equal the Average Unit Cost for each item. That way, the calculated cost of sale will always equal the actual cost. The most efficient way to do this is to import the changes to the Standard Cost field, rather than edit each item individually.

Alternatively, you can use a custom report writer such as Quik Reports, to create a report on the Sales Analysis and IC databases. It would involve calculating the Average Unit Cost for each item (as this is not a stored value in the Accpac IC database), and using this cost rather than the one found in Sales Analysis.

Regards,

I don't profess to be an accountant, and there are always very specific situations based on your industry that affect how the numbers need to stack up.

In your example for a Standard Costed item:
Item Actual Unit Cost = $600,000.00
Item Standard Cost = $500,000.00

Ship 1 of these items in OE and do a Day End. The Audit List has:

Cost of Sale = $500,000.00 (A)
Variance = $100,000.00 (V = B-A)
IC Control Account = $600,000.00 (B)

In your formula, you have [A + (B-A)], which no matter how you slice it, will always equal simply [B]. This is why I suggested the net result of SR using the Variance in it's calculation of cost would be simply the amount of the update to the IC Control Account.

Therefore, it boils down to which amount 'should' be in Sales Analysis; A or B? This would be entire separate than GL, which of course should always balance.

(Some people have Way! too much time to type into this forum!)

Antonio, if you are not seeing then variance amount, then it is because you have the same account for both sides of the variance. If the variance is not important to you, then why are you using Standard Costing - you should be using moving average.

Sorry, I'm sure we're right here. Thanks for all that detail Kate.

As an aside, the Sales Analysis database has always been seen as distinct from the accounting database. Sales Analysis allows you to edit numbers (including cost) without making any adjusting entries to the G/L. We believe that the database is statistical in nature.

Cheers