Costing methods

Use costing methods to determine the unit cost for all outgoing inventory transactions (issues, adjustments, and transfers). You can use Purchasing and Item and Order Billing to reference a company's costing method when creating Global Ledger entries.

• Standard Costing Method

  Inventory cost is based on the standard cost value that is specified for inventory items by location.

• Average Costing Method

  This is a moving or weighted average cost method. Each purchase is combined with the former inventory balance to determine a new average unit cost. Subsequent inventory issues are based on the new average cost. With any addition to stock-on-hand, the average cost is recalculated.

• LIFO (Last In, First Out)

  Inventory cost is based on the newest receiving cost record on file in Inventory Control. Records of receiving costs are the result of receipts and adjustments in Inventory Control, and the process of receiving items in Purchasing. All additions to inventory create a receiving record at a specific cost in Inventory Control.

• FIFO (First In, First Out)

  The inventory cost is based on the oldest receiving cost record on file Inventory Control.The oldest receipt is issued next. The cost of that receipt is the cost used for the next transaction.

• Costing Methods and Reporting

  You can select average, standard, LIFO, or FIFO for gross profit and general ledger purposes. If you select either average or standard, then FIFO is kept active for inventory valuation reporting. If you select standard, then the average cost is calculated for you.