Cost variance

Comments

4 comments

  • Rebecca Ralls

    Hi Matt.

    It sounds like you're using the standard cost model for costing your inventory. Are you operating on line level posting as well?   

    The reason you got a cost variace entry is because the system calculates the cost of the product based on whatever the cost is on the product at the time the payable is posted (which was after the cost had been updated).

    Your options to avoid a variance are to either make sure the payable is posted before the cost is updated, or to clear the variance after the fact via a journal entry. 

    This is definitely one of the pain-points of the standard cost model, and reconciling your vouchers payable and cost variance entries on a monthly basis is important, especially if you often have a situation where the cost is likely to change in between PO receipt and posting the AP invoice.  

    There are reports that can be generated that make reconciling those accounts easier with the help of a couple formula fields. If you'd like to to discuss reporting optimizations we can do for your org, you can contact my team at Coastal Cloud here: https://coastalcloud.us/contact/

    0
    Comment actions Permalink
  • Matt Leach

    We were under the impression that we were on average cost--is there a quick way to verify? Or is the fact that we got a variance in this scenario verification?

    0
    Comment actions Permalink
  • Rebecca Ralls

    I *think* variances are only generated if you are on standard cost.  But you can check which system you are on for sure by going to the Accounting Settings page and looking at the "Inventory Valuation Method" value under the Product Costing Aesttings group.  

    It is worth noting that even if you are on average cost, you can end up with variances in vouchers payable that will need to be adjusted out if your Payable has a different item cost than the PO.

    0
    Comment actions Permalink
  • Matt Leach

    Thank you for all your help!

    1
    Comment actions Permalink

Please sign in to leave a comment.