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Average Costing for Wholesale Distribution and Manufacturing

Written by Pieter Hamans on . Posted in Exact Online

An important deliverable for the international rollout of Exact Online is the support for average costing. Where inventory related financial entries in continental Europe are often based on the standard cost of items, other costing methods such as average are more prevalent in the UK and the USA. We are now ready to start the controlled release of the average costing functionality.

For which subscriptions will this become available?

Average costing is developed for wholesale distribution and manufacturing. It will be part of Basic, Advanced and Premium (future) editions. The average costing is a global setting, meaning that it can be enabled for a whole Exact Online company rather than by item or assortment. At this moment we are not working on the support of other valuation methods such as FIFO, LIFO or specific identification. Applying one or the other inventory valuation method should be considered carefully. Changing the valuation method does not affect historical transactions. On the other hand, we cannot undo transactions once we decide that a particular valuation method does not suit us after all.

Average 1

Wholesale Distribution

Inventory related transactions are not anymore based on a cost price entered at the item master but on the purchased value. The average cost is adjusted with each receipt, and the inventory value is the product of the stock quantity and the average cost. The cost of sales is based on the then average cost times the quantity delivered.

Average 2

Manufacturing

Material is issued to shop orders at the then average cost price. The receipt of a shop order is based on the projected cost price of the shop order. This will generally mean that the manufacturing variance becomes small or zero.

Difference with Exact Globe

Besides from the already mentioned global character of the average costing setting, all averages are established real-time and not during a batch process like in Exact Globe. The transactions are based on the values in the purchase order. If the purchase invoice deviates from the ordered amount, then the difference is recorded on the profit and loss, and not in the inventory value.

Availability

The average costing will become available for controlled release in February 2014 in the Netherlands. Although the feature will be released in all countries, start of the controlled release may vary from country to country. Interested companies should contact the local office of Exact Cloud Solutions.

More information with Pieter Hamans (pieter.hamans@exact.com).

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