The Attivo Blog

Thinking About Transitioning from Average to Standard Cost in Macola?

12-05-2017

Many companies that can benefit from using Standard Costing often make that change from Average Cost at the start of a new year, which is coming up rapidly. Moving from Average Cost to Standard Cost inventory valuation, and using the Macola Standard Cost module for the first time requires a bit of planning and a carefully executed series of steps. Following is the Overall Strategy that should be used:

1.When using the Standard Cost module for the first time, it is important that the Standard Cost module itself, which has a separate “Cost Master” table, be populated with costs. These costs are separate and distinct from the item location costs, and are used to ultimately update the standard cost values in the item location file. So, while still on Average Cost, utilize the Standard Cost module to create your intended standard costs. We at Attivo can provide a training guide for this purpose, as well as online training on the use of the Standard Cost module.

2. Analyze your newly created standards using the built-in cost analysis reports in the Standard Cost module, and correct any errors or discrepancies.

3. Move the newly developed standard costs in the Cost Master over to the Item Location file using the “Current to Standard Roll”. Since you are still officially on Average Cost in the Inventory Package Setting, this update to the standard costs in the Item Location file will have no impact to your Macola system. This step should be completed prior to the December month end, and ready for “flipping the switch” before any new business for 2018 is transacted.

4. On January 2, 2018, prior to any new transactions being entered, complete the month end closing process, and then change the inventory valuation method from Average to Standard in the Inventory Management Package Setting.

5. Print the closing Stock Status Valuation report from Macola. This report has a grand total cost for Last, Average and Standard Cost.

6. You will need to create a journal entry to reflect the difference in inventory value between the total Average Cost and the total Standard Cost after making the Package Setting change to Standard Cost.

7. The company is now officially on Standard Cost, using the Standard Cost controls in the Macola system. This represents a change in internal control policies that affects:
    1. Month end closing process, including journal entries made by the system to Purchase Price Variance, and various manufacturing variances (largely determined by use of POP or Shop Floor Control)
    2. Creation of new items and establishment of Standard Cost for new items
    3. Future updates to Standard Costs

We here at Attivo would love to chat with you about your software challenges.  Contact us to see how we might be able to solve your unique challenges in manufacturing.

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