The difference between Standard and Average Costing

on Tuesday, 01 January 2013. Posted in Blog

The following table outlines the functional differences between standard and average costing:

 

 

Standard Costing

 

Average Costing

 

Material and material overhead with Inventory; all cost elements with Bills of Material

Material with Inventory; all cost elements with Bills of Material

Item costs held by cost sub-element

Item costs held by cost element

Unlimited sub-elements

Unlimited sub-elements

Can share costs across organizations.  The master cost organization can be the only organization using WIP.

No shared costs; average cost is maintained separately in each organization

Moving average cost is not maintained

Maintains the average unit cost with each transaction

Separate valuation accounts for each subinventory and cost element

Separate valuation accounts for each cost element (see note below)

Variances for WIP transactions

No variances for WIP transactions

 

*The average unit cost is maintained at the organization level.  If you had separate valuation accounts by subinventory, total inventories would balance, but account balances by subinventory would not match the inventory valuation reports.

 

 

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