Manage your item pricing with one of the following costing methods.
When using a Standard costing method, a fixed cost price is assigned to goods for the financial period, usually a few months or a year.
The actual cost may vary, but the cost price should not be changed. The accountant may make a variance transaction in the General Ledger system to account for the difference at the end of the financial period.
Note: If the standard cost price is changed, Vista does not automatically generate a general ledger adjustment transaction. This can lead to issues with standard costing.
Standard costing can be useful in making it easier to identify cost and margin variations, and whether they are based on purchase price, usage, or loss.
Weighted average costing allows the cost price of goods to vary during the financial period. The weighted average cost per unit is calculated as the total cost of goods available for sale, divided by the quantity of goods available for sale (beginning inventory plus purchases).
This allows the actual cost price to be recorded at the time of delivery, which may cause the weighted average cost to change.
Weighted average costing is most useful if the major cost variations are due to changes in the purchase price, as it gives an accurate reflection of the real value of inventory and accurate profit margins.
The Last cost method records the last purchase order cost price of goods.
This can be useful in giving an early warning if margins are likely to drop, but it can be hard to identify variations and where they are coming from.
Using different costing methods
Using standard cost
If your organisation is using the Standard costing mode, a Cost Price should be configured for each Item, and should not be changed for the financial period.
Note: There are well-known Issues with changing an item's standard cost
When performing a Stock Receipt, the item's Standard cost price should be used, regardless of any variance in the actual cost at the time of delivery. Variance should be accounted for by a General Ledger transaction at the end of the financial period.
Using weighted average cost
If your organisation is using the Weighted average costing mode, a Cost Price should be configured for each Item, and should not be changed for the financial period. This is the same as Standard costing.
Unlike Standard costing, when performing a Stock Receipt, the actual cost at the time of delivery should be used. The Weighted average cost is calculated per unit as the total quantity divided by the total cost value.
Example: 100 Mars Bars are in stock with a cost of $1.00 each. 50 new Mars Bars are received into stock at a cost of $0.80 each.
|Qty||Actual Cost||Cost Value||Weighted Avg|
After the 50 additional units of stock are received, the Weighted average cost of Mars Bars is calculated as the total cost value divided by the total quantity ($140.00 / 150 = $0.93).
Using last cost
If your organisation is using the Last costing mode, a Cost Price should be configured for each Item, and should not be changed for the financial period. This is the same as Standard and Weighted average costing.
Like Weighted average costing, when performing a Stock Receipt, the actual cost at the time of delivery should be used. The Last cost is the last cost price recorded, relative to the reporting date.
- On Monday, 100 Mars Bars are received at a cost of $1.00 each.
- A report is run and displays the last cost as $1.00.
- On Wednesday, 50 additional Mars Bars are received at a cost of $0.80 each.
- A report is run and displays the last cost as $0.80.
The Last cost is often equal to the Standard cost, because for most Stock Adjustments and all normal transactions the cost price cannot be changed. The Last cost will only vary after Stock Receipts or Incoming Transfer stock adjustments, where the cost price can be manually entered.
The following examples show how Vista tracks the three types of cost price for Mars Bars simultaneously, as the received cost changes:
|Qty||Actual cost||Cost value||Std Cost||Weighted Avg||Last cost|
|+100 (=100)||$1.00||+$100 (=$100)||$1.00||$1.00||$1.00|
|+50 (=150)||$1.50||+75 (=$175)||$1.00||$1.16||$1.50|
|-10 (=140)||$1.00||-$10 (=$165)||$1.00||$1.18||$1.00|