A client wants to assemble components whose costing method is Standard, and have the cost of the assembled master item equal the sum of the standard costs of the components.

Is this possible in Adagio?

I did some testing, and no matter what configuration I chose, Adagio kept using the average cost of the components.

Thanks

Steve

Hi Steve,

Does the request make any sense? Wouldn't that require a posting to the Cost Variance account for every item in the assembly?

Hi Andrew

Yes. Let me think about that, though.

Help me with this. There are four ways the quantity of an item can be reduced - sale, stock transfer, assembly and adjustment.

For which ones does the costing method determine the cost - obviously for sale, but how about the other three?

Thanks

Steve

Hi Steve,

Let's do the easy ones first.

Sale
Costing is determined by costing method.

Stock Transfer
Since the total quantity of the items does not change (we don't do costing by location), the costing method is irrelevant.

Adjustment
You as specifically adjusting the quantity and total value. If you are using FIFO or LIFO then you will be able to adjust the total quantity and value in each of the 5 available buckets. Otherwise you will be adjusting the total quantity and value in bucket one.

Assembly
The only way you can increase the value of your inventory is by the additional costs incurred by the assembly process. The Assembly allows specification of a fixed and variable cost for each item built. The actual (average) cost of the components is used to determine the total cost (value) of the item you built.

So - the costing method specified in the Account Set is used only when an item is Shipped.

Having said all this, there has been discussion about costing component items as they are received. And we have also had a few requests that the component costing method be used during Item Assembly.

While this sounds simple to do, there would have to be an enormous amount of Quality Assurance that all the math was being performed correctly out to 6 decimal places including foreign currency conversion. In this particular case, the testing dwarfs the programming involved.

Hi Andrew

How about if the Stock Transfer is from one item to another, and the one being transferred from is using Standard costing?

I would not have intuited that an assembly ignores the costing method of the components - I guess I'm OK with it but I think it should be noted somewhere. The workaround is to have the master item use Standard costing, and enter as its standard cost the sum of the standard costs of the components. This will only be a problem if the master item has multiple bills of material, or if it is also purchased outright. However, it will be harder to maintain the proper standard cost when component costs change.

Steve

I think that we treat a stock transfer between item numbers as a correction to an entry error. The Average cost would be used so that the balance sheet wouldn't change.

The balance sheet would definitely change if the two items are assigned to different Control Accounts, with different Inventory control accounts. So I don't think that would be a reason to assume the Average cost would be used.

Steve

Hi Steve,

I think that even if the two items used different control accounts, the total value of the items in inventory would be the same when you transferred items between item numbers.