Standard Cost Calculation

Some companies need the ability to calculate in-transit inventory at the end of each month. With inventory items, the following can happen:

• Invoices are approved before the goods are actually received

• Invoices are matched for a quantity greater than what you received

The program Standard Cost Calculation (PO139) is for standard cost companies and addresses the following two situations with inventory items.

PO139 is for companies that take ownership of goods at the shipment date, rather than the date they receive the goods at their own site. Such companies may use the Matched Not Received (MNR) account as an in-transit account. By running the program, you create reversing journal entries to the Matched Not Received account for the difference between the standard cost and the purchase order cost. Thus, the in-transit inventory account reflects at the standard cost.

In addition, PO139 is for companies who use the posting process to accommodate the consignment process (you have inventory but do not own it). When you issue the inventory items, you are billed for them, but want zero value for the inventory items until they are actually used. By running PO139, you create reversing journal entries for the difference between the purchase order cost and the standard cost for items that are received not invoiced (RNI). The journal entries post to the PO Accrual account and offset the inventory cost variance account, allowing for zero-cost inventory.

You run Standard Cost Calculation (PO139) once a month, after running Invoice Distribution Closing (AP175) and General Ledger Interface (IC130). When you close the next general ledger accounting period by running Period Closing (GL199), the journal entries created by PO139 are reversed.