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From The Community #1 – Standard Cost vs. Current Cost

March 12, 2010

Another post that I have tried to answer in the Dynamics GP Community forums regarding the difference between Standard and Current Costs.

Our understanding of the Standard Cost, is that it is a controlled cost. There is nothing that will recalculate the Standard Cost automatically. We use standard cost so that we can control the base price of what our items are selling at (we sell with Margin % above Standard Cost in our price list).

The reason we do this is because, depending on when we buy raw materials, we may be buying in bulk or at a very lucrative time in our market and get a great deal. We do not necessarily want to pass that good deal on to our customer. We want to control what our selling cost is based on the true market value (which really is what you can sell the item for).

This is taken from a post I commented on in the Dynamics GP forums:

Not to reexplain what you already know but, let’s say you buy 100 widgets for $1.00 and then another 50 widgets for $1.25. The way GP works using current cost is, based on your valuation method (we use FIFO Perpetual), your current cost will start out as $1.00. Your standard cost will be whatever cost you manually place in that field, let’s say $1.10. After you have sold the 100 widgets, your CURRENT COST will be recalculated from $1.00 to $1.25. Your STANDARD COST, will however, will not be recalculate and will stay at the $1.10. Now your standard cost will be showing $0.15 less for the widget than your actual cost of $1.25. Now if you still have the 50 widgets at $1.25 and you have a price increase again and the same widget costs you $1.50, you can change the standard cost to $1.50 (or whatever you want) and sell off of that $1.50 while your current cost is still showing $1.25.

I hope this helps explain Standard and Current costs a little better.

From → Dynamics GP

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