Current Costs
Current costs represent the costs for producing your products based on inventory receipts and work order labor transactions. These reflect what you are currently paying your suppliers for purchased materials and the current labor hours being consumed in producing the items at the work center labor rates.
When you have a standard costing system, the current cost set can be used to track the running average or last cost for use in determining next year’s standard cost or for providing a record of recent actual costs.
Methods that can be used with the current cost set are Last, Average, or None.
Last
Each receipt sets the current cost to the last cost of that item. In the case of purchased material, this is the purchase or invoice price.
Average
Whenever an item is received, a new weighted average cost is calculated and stored in the cost set, this values all inventory at the new weighted average cost.
None
Current costs are maintained manually in the system or not used.
The method to use is selected in Inventory Accounting Control (36.9.2).
Costing is covered in more detail in
Cost Calculations.
Terminology
Cost Set
QAD EE has two default cost sets—GL and current—that are available for each site. A site can have additional cost sets set up in the Cost Management module, such as historical costs from prior periods and simulated costs for planning purposes.
Current Cost Set
The current cost of an item is normally based upon recent production and/or purchases. Current costs are the actual costs from inventory receipts and work order labor transactions.
The use of the term actual is a convention adopted by cost accountants and may not be an actual cost in the strict sense of the word. For example the labor cost of an item is the hours charged multiplied by the work center labor rate. The work center labor rate usually reflects an average rate for all workers in the work center, rather than the actual rate of the person who worked on a specific work order.
Standard Costing
Costs are preestablished for items and all transactions are valued at that cost as they are processed. Deviations in the costs are reported as variances. Standard costs are usually established once a year.
GL Cost Set
GL cost is a term that distinguishes costs used for valuing inventory and for determining cost of goods sold from other costs such as current costs. GL costs can be based on either a standard or an average cost method.
Variance
In a standard cost system the variance is the difference between the standard cost and the current cost. It is usually reported on a monthly basis.
