# Inventory costing

Hi Lydia,

I agree with your statement regarding standard costs but I'm skeptical about
the one regarding average costs. My understanding of the average cost
calculation in Vantage is that it is a weighted average. For example, say
you start with 10 units in stock with an average cost of \$1.20, giving you a
total value of \$12.00. Then, if you receive 2 new units with a cost of
\$0.00, Vantage will calculate a new total value of \$12.00 (12.00 + (2 *
0.00)) and a new average cost of \$1.00 (\$12.00/12 units). The end result is
no change in the total value of inventory of this part because Vantage
recalculates the average unit cost for the part. Of course, you would have
just created a variance from your standard cost, but that's the way standard
costs are supposed to work.

-----Original Message-----
From: Lydia Coffman [mailto:lcoffman@...]
Sent: Monday, August 21, 2000 4:55 PM
To: vantage@egroups.com
Subject: RE: [Vantage] Inventory costing

A word of caution (verified with our accountant): if you receive 2 parts
into inventory from manufacturing at \$0, if that part has a cost already
associated with it(as in standard cost or average cost), your inventory
value will increase by the number of parts x the cost - even if the receipt
is at \$0!!! So you are leaving your cost on the job, but your inventory
value still increases.

[Non-text portions of this message have been removed]
We are in the very same situation with one of our divisions. Right or
wrong, this is what we do. Let's say a customer orders 4 pcs of a
particular part. When we run this part we end up making 6 pcs. We will
ship 4 and then close the job. If I understand it correctly any costs
remaining on the job when it is closed go to a variance account. We then do
a quantity adjustment, and a cost adjustment to 0 if neccessary, for the
remaining 2 parts so they show in stock with 0 value.

Hope this helps,

Chris Brisbin
Hammill Mfg. Co.
Phone:(419)476-0789
Fax:(419)470-5560
e-mail: chris.brisbin@...

-----Original Message-----
From: Malcolm Spann [mailto:Malcolm@...]
Sent: Friday, August 18, 2000 5:14 PM
To: vantage@egroups.com
Subject: [Vantage] Inventory costing

We're a jobshop. Some of our customers generate enough repete
business to establish some parts as 'Make to Stock', setting
min/max levels and reorder points. However, a large portion of our
business is 'Make to Order', and we never know if the customer will
ever come back for that part again.

The boss believes that, since we don't know if the customer will
ever come back for that part, and we can't sell it to anyone else, it
has *no* value. But, rather than just throw it away, we *do* want to
be able to see if we have any 'in stock'. Therefore, the boss would
like us to be able to put all the costs of a job against the parts we
actually ship, and put any extras into inventory at no cost.

Malcolm Spann
One good solution I have found is to maintain these parts in a separate
warehouse in Vantage. This way, you can see how many of these items are in
stock, and how much they cost. This requires accounting to make one journal
entry per month at closing to reduce inventory to eliminate these transfers
into stock, but it is a rather easy entry.

At month closing the stock status report is run EXCLUDING this "zero value"
warehouse. This gives the true value of inventory. Not fancy, but it has
worked well for me.

Rick Lane
Intelligent Systems Integration, Inc.
661B Weber Drive
330-335-5291
Fax: 330-335-7275

"Helping business make intelligent use of technology"

-----Original Message-----

We're a jobshop. Some of our customers generate enough repete
business to establish some parts as 'Make to Stock', setting
min/max levels and reorder points. However, a large portion of our
business is 'Make to Order', and we never know if the customer will
ever come back for that part again.

The boss believes that, since we don't know if the customer will
ever come back for that part, and we can't sell it to anyone else, it
has *no* value. But, rather than just throw it away, we *do* want to
be able to see if we have any 'in stock'. Therefore, the boss would
like us to be able to put all the costs of a job against the parts we
actually ship, and put any extras into inventory at no cost.

We tried 'scrapping' out any extra parts before our 'final operation',
shipping the parts, and doing an inventory adjustment to put the
extra parts into inventory. However, since we use 'Average
Costing', Vantage still put the parts into inventory with a value
(ignoring the extra work for all involved!).

How has anyone else handled this issue?

===============================================
Malcolm Spann
MIS
Malmberg Engineering
(925) 606-6500
Malcolm@...
===============================================
Hi Malcolm,

I use Receipts from Mfg. Then override the supplied costs with zero. This
receives the extra part(s) to inventory at no cost, leaving all the costs on
the job.

Bob Bruton
Entek Corp.
bob@...

-----Original Message-----
From: Malcolm Spann [mailto:Malcolm@...]

We're a jobshop. Some of our customers generate enough repete
business to establish some parts as 'Make to Stock', setting
min/max levels and reorder points. However, a large portion of our
business is 'Make to Order', and we never know if the customer will
ever come back for that part again.

The boss believes that, since we don't know if the customer will
ever come back for that part, and we can't sell it to anyone else, it
has *no* value. But, rather than just throw it away, we *do* want to
be able to see if we have any 'in stock'. Therefore, the boss would
like us to be able to put all the costs of a job against the parts we
actually ship, and put any extras into inventory at no cost.

We tried 'scrapping' out any extra parts before our 'final operation',
shipping the parts, and doing an inventory adjustment to put the
extra parts into inventory. However, since we use 'Average
Costing', Vantage still put the parts into inventory with a value
(ignoring the extra work for all involved!).

How has anyone else handled this issue?

===============================================
Malcolm Spann
MIS
Malmberg Engineering
(925) 606-6500
Malcolm@...
===============================================

[Non-text portions of this message have been removed]
We do exactly what Rick spoke about below and it has been working well for
us. But I like finding out what other's do for a solution, as well.

Joy Fekkes
Jaco, Inc

-----Original Message-----
From: Rick Lane [mailto:rickl@...]

One good solution I have found is to maintain these parts in a separate
warehouse in Vantage. This way, you can see how many of these items are in
stock, and how much they cost. This requires accounting to make one journal
entry per month at closing to reduce inventory to eliminate these transfers
into stock, but it is a rather easy entry.

At month closing the stock status report is run EXCLUDING this "zero value"
warehouse. This gives the true value of inventory. Not fancy, but it has
worked well for me.
A word of caution (verified with our accountant): if you receive 2 parts
into inventory from manufacturing at \$0, if that part has a cost already
associated with it(as in standard cost or average cost), your inventory
value will increase by the number of parts x the cost - even if the receipt
is at \$0!!! So you are leaving your cost on the job, but your inventory
value still increases.