Creating Multiple Cost Sets

Multiple sets of costs can be maintained for any item, each identified by a cost set code. Data associated with a cost set code controls how these costs are updated and used.

Use Cost Set Maintenance (30.1) to set up GL, current, and simulation cost sets and to specify the costing method for each set.

Each cost set must be assigned one of four type codes, indicating its purpose.

GL: Cost sets of type GL, when associated with sites using Cost Set to Site Assignment (30.9), are used with GL transactions to value inventory and determine the cost of sales.

Current: Current cost sets are typically system maintained and used for reporting purposes.

Simulated: Simulated cost sets are for reporting only and are typically used for planning, developing new standards, or simulating the effects of a cost change. Simulated costs cannot be system maintained. You must maintain them manually using functions on the Cost Simulation Menu (30.13).

PC: Periodic costing is in use. This functionality allows you to calculate costs over user-defined periods based on weighted averages, or averages calculated based on when material is received (LIFO or FIFO).

Period costing is the actual cost of an item based on inventory transaction information—transactions, BOMs, routings, purchase prices, expenses—that occurred during a certain period (usually a month). It also takes into the account the beginning balance of the item while it is performing the calculation of this period costing. Period costing does not include the concept of variations; the costs are recalculated each time.

When PC is the cost set type, the system displays an additional frame to indicate whether to use the PC cost set template. The system maintains a detailed cost set for every combination of cost-calculating period and currency. Each detailed cost set cost assumes all the elements defined for the template cost set. You only need to set up one periodic cost set, so you use the template cost set features in the Periodic Costing Menu (30.5) and not Cost Management (30) features to create the periodic costing template cost set.

A costing method must be assigned to each cost set indicating how costs are defined and maintained. See Cost Sets and Methods.

Average: Costs are updated during item receipts and other inventory-related activities using a simple weighted-average calculation.

Standard: Costs are not updated automatically. Updates are performed manually and typically no more than a few times a year.

Last: Each item’s cost is equal to the unit cost from the last receipt or inventory update.

None: Costs are not updated automatically. They are maintained manually as needed.

WAVG: Weighted Moving Average method considers the previous period cost and the average of the cost incurred this period.

FIFO: First in first out method considers the receipt date of items for the existing inventory. This method assumes that the oldest (first) item in stock is issued first.

LIFO: Last in first out method considers the receipt date of items for the existing inventory. This method assumes that the latest (last) item in stock is issued first.

• For PC (periodic costing), cost method can be AVG (weighted average), FIFO (first in first out), or LIFO (last in first out).

After you have defined cost sets, you can assign them to separate sites using Cost Set to Site Assignment (30.9).

Important: Only one active GL and one active current cost set per site are permitted. The system automatically updates average or last costs only for these two cost sets.

You cannot delete a cost set using Cost Set Maintenance, even if it was added by mistake. You must use Cost Set Delete (30.23) to delete all other cost information completely.