Standard Cost Adjustments

When using the standard cost adjustment process, the system automatically makes adjustment postings to the General Ledger and Inventory Management modules for each standard cost amount changed and provides an audit trail of the standard cost changes.

You have an item with a standard cost of $2.00 and there is a quantity on hand of 10 items in your warehouse. The standard cost change will be posted to your general ledger on 1/31/10. There are 4 transactions in your item transaction history file, but only two of them are dated beyond the adjustment date.

Transaction Date	Transaction Quantity	Extended Standard Cost
1/13/10	6	12.00 (Received 6 at $1.00 each)
1/21/10	5	10.00 (Received 5 at $1.00 each)
2/15/10	3	6.00 (Received 3 at $3.00 each)
2/17/10	-4	-8.00 (Sold 4 at $2.00 each (the standard cost))

These transactions generated postings to the general ledger inventory account totaling $20. The quantity-on-hand and standard cost extends to $20 (10 * $2). The standard cost is being changed to $5.00 on 1/31/10.

The transactions prior to 1/31/10 are ignored and will be included in the final adjustment which is based upon the quantity-on-hand for the warehouse. The third transaction generates an adjustment of $9.00 ((3 * $5) - (3 * $2)). This will be posted to the general ledger on 2/15/10. The fourth transaction generates an adjustment of -$12.00 ((-4 * $5) - (-4 * $2)). This transaction will be posted on 2/17/10. To calculate the final adjustment, you need to look at what the adjustment would be for the current quantity-on-hand (10) and reverse the adjustment amounts you made for future transactions. The adjustment amount for the on-hand quantity would be $30 ((10 * $5) - (10 * $2)). Since you already made future adjustments of -$3, the final adjustment amount is $33 ($30 - (-$3)). This adjustment will be posted on 1/31/10.

The three adjustments produce a general ledger balance of $50 ($20 + $9 + (-$12) + $33). The quantity-on-hand and new standard cost also extends to $50 (10 * $5). The following occurs when an adjustment is generated:

The inventory and adjustment accounts in the Product Line file are used to post to the general ledger.
The general ledger adjustment postings are updated to the Inventory file with the following transaction codes: BC (adjustment originates from Bill of Materials), WC (adjustment originates from Work Order), and IC (adjustment originates from Inventory Management).

The standard cost adjustment process affects the following tasks areas in the software.

You should not use the Visual Integrator module to change the standard cost for standard cost items when importing data into Item Maintenance. You must create a new Visual Integrator job to import data into a new table being created for Standard Cost Adjustment Entry. You can then use Standard Cost Adjustment Entry if you need to change the standard cost for standard cost items.

Standard Cost Adjustments in Item Maintenance

You can only change the standard cost in the Standard Cost field in Item Maintenance for standard cost items with no activity; however, you can change the cost for items not using the Standard Cost valuation method.

Standard Cost Adjustments using Automatic Cost and Price Change

You cannot change the standard cost for standard cost items using Automatic Cost and Price Change. You must use Standard Cost Adjustment Entry to change the standard cost items.

Printing Standard Cost Items in Inventory Management Reports

The Inventory Valuation by Period Report, Inventory Trial Balance, and Inventory Detail Transaction Report print the historical standard cost by default, and you have the option to print the current or historical cost. A report header appears to indicate whether the cost is current or historical. This indication appears only if a standard cost item is included on the report.

Note For the Inventory Detail Transaction Report, standard cost adjustments are excluded if the current cost is used.

Standard Cost Adjustment using Item Valuation Change

If you change an existing item's valuation method to standard cost, the historical cost does not exist. If you change the valuation method from standard cost to another method, the historical standard cost will no longer be referenced.