About Changing an Item's Cost Method - Standard

Caution: Changing an item's cost method or cost type on the Item Costs form can cause the system to automatically post financial transactions that reflect the valuation differences between the old and new cost method or cost type.

If the change you make affects any of the five cost components of inventory, the system will debit or credit the appropriate inventory account. The system will make the balancing entry to the Inventory Adjustment account.

When you change the cost type from "Actual" to "Standard," you should always run the Roll Current Cost to Standard Cost utility again.

Changing From Average

When changing from Average to LIFO, the system:

Creates one LIFO/FIFO stack record for all stockroom locations that share the same set of material, labor, fixed overhead, variable overhead, and outside accounts, and whose quantity on hand is not equal to zero.
Assigns to the stack the accumulated quantity on hand from each stock location or lot/location record.
Indented Bulleted List

When changing from Average to FIFO, the system:

Creates one LIFO/FIFO stack record for all stockroom locations that share the same set of material, labor, fixed overhead, variable overhead, and outside accounts, and whose quantity on hand is not equal to zero.
Assigns to the stack the accumulated quantity on hand from each item stock location or lot location record.

When changing from Average to Specific, the system:

Assigns the Average unit costs to the item location.

When changing from Average to Standard:

No change is needed.

Changing From LIFO

When changing from LIFO to Average, the system:

Calculates total value of inventory & divides by the quantity on hand to determine the new unit cost.
Updates the item's average unit cost with the new average.
Deletes the LIFO/FIFO stacks.

When changing from LIFO to Specific, the system:

Determines the average unit cost of items in the LIFO/FIFO stack. (This will be a new Specific cost.)
Deletes LIFO/FIFO stacks.

When changing from LIFO to Standard, the system:

Deletes the LIFO/FIFO stack records.

Changing From FIFO

When changing from FIFO to Average, the system:

Calculates total value of inventory & divides by the quantity on hand to determine the new unit cost.
Updates the item's average unit cost with the new average.
Deletes LIFO/FIFO stacks.

When changing from FIFO to Specific, the system:

Determines average unit cost of items in LIFO/FIFO stack. (This will be new specific cost.)
Deletes LIFO/FIFO stacks.

When changing from FIFO to Standard, the system:

Deletes the LIFO/FIFO stack records.

Changing From Specific

When changing from Specific to Average, the system:

Computes the Average cost of items on hand.
Assigns this value to the item's unit costs & Average costs.

When changing from Specific to LIFO, the system:

Creates one LIFO/FIFO stack record for all stockroom locations that share the same set of material, labor, fixed overhead, variable overhead, and outside accounts, and whose quantity on hand is not equal to zero.
Assigns to the stack the accumulated quantity on hand from each stock location or lot/location record.

When changing from Specific to FIFO, the system:

Creates one LIFO/FIFO stack record for all the stockroom locations that share same set of material, labor, fixed overhead, variable overhead, and outside accounts, and whose quantity on hand is not equal to zero.
Assigns to the stack the accumulated quantity on hand from each stock location or lot/location record.

When changing from Specific to Standard, the system:

Assigns a zeros in the Item Stockroom Location or the Lot Location Unit Cost fields.

Changing From Standard

When changing from Standard to Average, the system:

Assigns the item's Average unit costs and unit costs to what the Standard costs had been.

When changing from Standard to LIFO, the system:

Creates one LIFO/FIFO stack record for all the item stockroom locations that share the same set of material, labor, fixed overhead, variable overhead, and outside accounts, and whose quantity on hand is not equal to zero.

When changing from Standard to FIFO, the system:

Creates one LIFO/FIFO stack record for all the item stockroom locations that share the same set of material, labor, fixed overhead, variable overhead, and outside accounts, and whose quantity on hand is not equal to zero.

When changing from Standard to Specific, the system:

Assigns the unit costs on the stockroom location or the lot location records to the unit costs from the Item Costs form.