About Unit Costs

This topic describes unit costs.

Standard Unit Cost

The amount that appears in the Unit Cost/Standard Unit Cost field (located on the Items and Item Costs forms) for an item depends on the cost method which you have instructed the system to use for that item. The table below summarizes the storage and posting of costs for the available cost methods.


When Cost Method is...	The field label is...	The field contains
Average (Actual)	Unit Cost	The item's average cost, used for inventory valuation. This is the cost at which the item is next issued. It is updated using a weighted cost calculation each time the item is received into inventory. You can also change it by changing the values on the Cost Maint tab on the Item Costs form.
LIFO/FIFO (Actual)	Unit Cost	The unit cost value is mostly informational. The actual costs being used for inventory valuation and issuing the item are being stored in the Item Stockroom Locations form. With these methods, the Unit Cost shows you the next cost at which the item is issued. If using LIFO, this is the unit cost that is tied to the last record in the Item LIFO file for the item. If using FIFO, it contains the cost that is tied to the first record currently in that file.
Specific (Actual)	Unit Cost	The unit cost value is mostly informational. It contains the last cost at which the item had been received. You can view the valuation and issue costs for the item on the Costs tab on the Item Stockroom Locations form (if the item is not lot tracked) or on the Item Lot Locations form (if lot tracked). It is also the cost used if the item's on-hand inventory is driven negative. The system updates it each time a receipt into inventory is processed for the item (PO receipt, job move to stock, etc.).
Standard	Standard Unit Cost	The item's standard cost, used for inventory valuation and for posting to the General Ledger for all transactions that move the item to or from inventory. For new items with on-hand inventory of 0 and that have had no material transactions (new items), you can enter a standard cost on the Cost Maint tab on the Item Costs form. Otherwise, you can change the standard cost only by running the Roll Current Cost to Standard Cost utility.

Current Unit Cost

The Current Unit Cost field maintains the cost for one unit of the item. The system automatically updates this field when you receive a purchase order or perform the Current BOM Cost Roll Up.

If you update the Current Unit Cost field on the Items form (under Actual or Standard costing), the Material cost on the Item Costs form is calculated using this calculation:

Material Cost = Unit Cost - Duty - Freight - Brokerage - Insurance - Local Freight

The system updates the Current Unit Cost field for purchased and manufactured items as follows:

Purchased Items

When "Average" is displayed in the Update Current Cost field on the Purchasing Parameters form, the Current Unit Cost field contains the average purchase cost of the item. When you receive the item into stock using the PO Receiving function, the new average cost is calculated and posted to this field as follows: AC = (OQOH * OAC) + (RQ * PUC) / (OQOH + RQ), where:

AC = Average Cost
OQOH = Old Quantity On Hand
OAC = Old Average Cost
RQ = Receipt Quantity
PUC = Purchase Order Unit Cost

Note: If the Cost Method is "Average," the Unit Cost field contains the Average unit cost. Therefore, the Current Unit Cost field does not also require the Average cost.

If you specify Last in the Update Current Cost field, the Current Unit Cost field contains the last cost at which you received the item through the Purchase Order Receiving function. When you process the Purchase Order Receiving transaction, the system posts the purchase order line item unit cost to the Current Unit Cost field.

If you specify None in the Update Current Cost field, values are never automatically posted to the Current Unit Cost field.

Note: If you are using some type of Actual costing, you can use the Current Unit Cost field to maintain a Standard cost for the item. Specify a cost in this field manually. The value you enter is never changed.

When you run the Current BOM Cost Roll Up utility, the system posts the value in this field for purchased items to the Unit Cost field on all material records for this item in all standard bills of material.

Manufactured Items

For all manufactured items, the Current Unit Cost field holds the result of the Current BOM Cost Roll Up utility. This utility calculates the rolled-up cost for each manufactured item using the current routing and bill of material for the item. It totals the material, tooling, fixture, run, setup, overhead, and outside costs, and posts the result to this field.

For sub-assembly items, the system posts the rolled-up amount to the Unit Cost field on all material records of any bill of material which include the sub-assembly item.

Where Unit Costs are Stored

These fields store the cost of each item:


Field	Form
Unit Cost/Standard Unit Cost	Items (held in total and display only)
Current Unit Cost	Items (held in total and display only)
Unit Cost	Item Costs (the cost detail components of the total cost)
Current Unit Cost	Item Costs (the cost detail components of the total cost)

These fields control the way the costs are maintained, processed, and applied:


Field	Form
Post to Journals	General Parameters
Update Current Cost	Purchasing Parameters
Cost Type	Items
Cost Method	Items
Unit Cost/Standard Unit Cost	Items Item Costs
Current Unit Cost	Items Item Costs