Using the Standard Cost Worksheet in Microsoft Dynamics NAV
If your company is using the Dynamics NAV Standard Cost Method, there are times when you need to establish Standard Costs for Purchase and Produced items.
In Dynamics NAV there is functionality and a process for establishing Standard Costs that will update the Standard Costs for the Items, and, just as importantly, create a Revaluation Journal that, when posted, will keep the General Ledger in balance with the Inventory Subledger.
Times when you might want to establish or reestablish Standard Cost for Items include:
- When you add new items
- When you find a significant mistake in the purchased item cost, the Production BOM, and/or Routing and want to make a correction
- When there has been a significant change in the cost of raw materials
- When there is a significant change in the Production BOM
- When there a significant changes in the Production Process
- Fiscal Year End Rollup and Revaluation
This functionality for updating Standard Costs in Dynamics NAV is called the Standard Cost Worksheet:
Figure 1 – Viewing the Microsoft Dynamics NAV Standard Cost Worksheet
Following is the process to establish new Standard Costs using the Dynamics NAV Standard Cost Worksheet:
- Populate the standard cost worksheet with the purchased items.
- Change the “New Standard Cost” to be what is expected to pay on purchases for the next fiscal year.
- Populate the standard cost worksheet with the work centers and machine centers.
- Change the work center and machine center direct costs, overhead %, and overhead rate as calculated for the next fiscal year.
- Roll up the standard cost for the produced items. The rollup will use the new standards for purchased items and work/machine centers contained in the standard cost worksheet—if the purchased item or work/machine center is not in the Standard Costs.
- Implement the standard cost worksheet.
- This will update the item cards for both purchased and produced items.
- This will also create a revaluation journal based on the difference in value of each positive item ledger entry (with a remaining quantity) and the new standard for the item.
- Post the revaluation journal.
- This will post the differences to the General Ledger to bring the General Ledger into agreement with the Inventory Subledger.
- This will also add the necessary Value Entries so that when the inventory valuation report is run the value of the inventory will be equal to the standard cost of the inventory and the unit cost on the item card will be equal to the standard cost for the item.
Now let’s take a closer look at the steps involved:
#1 – Populate the standard cost worksheet with the purchased items. At this point there is only one way to suggest new standards—to adjust the old standard up or down based on a percent. ArcherPoint has worked with clients to suggest new standards in different ways. For instance, use the last direct cost from the item card as the new standard.
Figure 2 – Populate the Suggest Item Standard Cost fields
The result is that all of the purchased items with a standard cost method are brought into the standard cost worksheet:
Figure 3 – All purchased items with a standard cost method are brought into the standard cost worksheet
#2 – The Cost Accounting Department in conjunction with the Purchasing Department then populates the Standard Cost Worksheet with the New Standard Cost.
#3 – Populate the standard cost worksheet with the work centers and machine centers:
Figure 4 – Populate the standard cost worksheet with the work centers and machine centers
The result is that the Work and Machine Centers are brought into the Standard Cost Worksheet:
Figure 5 – Work and Machine Centers are brought into the Standard Cost Worksheet
#4 – Change the work center and machine center direct costs, overhead %, and overhead rate as calculated for the next fiscal year.
Figure 6 – Change the work center and machine center figures for the next fiscal year
#5 – Roll up the standard cost for the produced items:
Figure 7 – Roll Up Standard Cost for the produced items
This will roll up the Standard Cost for the Produced Items and put them in the Standard Cost Work Sheet:
Figure 8 – The Standard Cost for the Produced Items are rolled up and put in the Standard Cost Work Sheet
#6 – Implement the Standard Cost Changes:
Figure 9 – Implementing the Standard Cost Changes
This will update the Item Cards with the new Standard Costs and will create a Revaluation to be posted to bring the General Ledger into balance with the Inventory Subledger
Figure 10 – A Revaluation will be posted to bring the General Ledger into balance with the Inventory Subledger
#7 – Post the revaluation journal.
To find out more about various Dynamics NAV costing topics, please contact ArcherPoint.
Read more “How To” blogs from ArcherPoint for practical advice on using Microsoft Dynamics NAV.