RAW MATERIALS COSTING

The recording of costs and values of Raw Materials (aka Parts) is controlled by preferences.

This discussion is very similar to how costs and value of Finished Goods are controlled.
Maintenance > Preferences > General
Preference #1

A. Hybrid – Requires the user to make a determination of how cost gets recorded each time there is a change in parts inventory.
B. Standard – Costs never change unless edited directly by the user. Receiving on PO’s does not affect cost.
C. Real Time, with Ledger – Costs are updated when parts are received, based on the cost on the PO, and any additional costs that are applied to the parts. Ledger transactions are inserted whenever the value of parts in stock are changed.
D. Real Time, NoLedger – Costs are updated when parts are received, based on the cost on the PO, and any additional costs that are applied to the parts. Ledger transactions are NOT inserted whenever the value of parts in stock are changed.

This preference also controls the Finished Goods Inventory.
If the Preference is changed, you must click the Set Prefs button to update other preferences to maintain compatibility.

There are pros and cons for each of the selections. You may want to discuss further with your accountant and us.

More detail:
A. Hybrid
Other PO and Inventory Preferences can control the updates at different points in the cost cycle. This can become inconsistent if the user has to make a decision at each point. We no longer recommend the use of the Hybrid method, although that is the default for new data files.

B. Standard
This method provides tight control of costs, and will require periodic reconcilations if real costs change. It can be a good method for companies on a seasonal cycle. You will want to discuss this option with your accountant.

C. Real Time, Ledger
This will give you the ability to run financial statements for interim periods. However, it can populate your ledger file with many inventory transactions. It will require a month end inventory adjustment, although the amounts will usually be small to deal with fractions, damages, etc.

D. Real Time, No Ledger
Parts costs are updated in real time, and thus the costs of finished goods are accurate when Cut Tickets are processed. Month end inventory reconciliation must be done to generate good financial statements. This is our favorite method.