Can we set raw material and component parts as ave...
# manufacturings
Sam
12/03/2023, 7:15 PMCan we set raw material and component parts as average cost, but the assemblies and finished goods as standard cost? What happens to the accounting delta created when the average cost components equal more or less than the finished product component value?
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Andrew Altringer
12/10/2023, 3:13 AM@Sam - Why would you ever want to do that?
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Sam
12/10/2023, 7:10 PMHaha great question, I'm not a finance expert. The company controller wants to keep finished products p&l and inventory value standard cost for the first year because he is afraid the average costs will fluctuate too much and he wants to measure against expected estimated cost per unit. However, they do not want to manage standard costs for all the raw materials and component parts they purchase. Especially since they are often serial or lot inventory raw materials.
Im not a manufacturing or finance expert but I have consistently recommended they do not use standard cost as we go live. His intention is to switch to avg cost 2025
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Andrew Altringer
12/10/2023, 8:38 PM@Sam - Standard Costing in NS is an ABSOLUTE NIGHTMARE! Moving from Standard to Average is a HUGE pain as well. So before you make that switch to Avg Costing you should 100% setup the Lot/Serialized Costing in their SB environment. This setting will capture product costs when they are brought in on their Lot or Serialized items. It goes hand in hand with the setup for those items.
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Sam
12/11/2023, 2:52 AMHey @Andrew Altringer, so you are saying lot/serialized costing becomes more important with avg costing? And have you ever used a custom lot record instead of native netsuite lot tracking?
Thanks! Sam
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Andrew Altringer
12/11/2023, 11:15 AM@Sam - I am saying that you will want to have the Controller review the Costing Method: Lot Numbered that would potentially replace Avg Costing. It will associate the cost with the purchase of each Lot Number/batch that you purchase when the IR is created. Avg Costing is constantly running at all times and generating your Avg Cost per Location.
Link To Costing Methods
https://docs.oracle.com/en/cloud/saas/netsuite/ns-online-help/section_N2191818.html#Costing-Methods
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Andrew Altringer
12/11/2023, 11:31 AM@Sam - No I have not setup a custom record to duplicate the Lot Number functionality. I have always designed the Lot Number functionality to meet the client's use case. To be successful with what you are trying to do you would have to assign that Lot Number in some type of order and then have it follow that inventory qty on-hand (batch) throughout it's useful life until it is either consumed to build an Assembly item or shipped directly to the Customer. There would be a very decent amount of customization involved in that design. You should answer the 2 questions below and I could point you in the right direction much easier.
1. What industry is the client operating in and what are their primary operation processes?
2. What do they specifically not like about NetSuite's Lot Number feature? What is too "rigid"?
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Sam
01/08/2024, 9:28 PMGreat question, I'm not a finance expert. The company controller wants to keep finished products p&l and inventory value standard cost for the first year because he is afraid the average costs will fluctuate too much and he wants to measure against expected estimated cost per unit. However, they do not want to manage standard costs for all the raw materials and component parts they purchase. Especially since they are often serial or lot inventory raw materials.
Im not a manufacturing or finance expert but I have consistently recommended they do not use standard cost as we go live. His intention is to ...
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Andrew Altringer
01/11/2024, 10:57 PMSo there is a solution where they can have average costing and have Standard to track with the item.
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