Standard Costing Method
Standard costs are carefully predetermined target or attainable costs that are useful in building budgets and gauging performance. You might use this method if your item costs do not vary much, or if stock turnover is rapid.
When you use the standard costing method, Inventory Control records the difference between the weighted moving average cost and the standard cost in the cost variance general ledger account, and uses weighted moving average to value your inventory.
Under the standard costing method, actual costs are posted to inventory upon receipt. The inventory is then valued and reported on the basis of the weighted moving average cost for each item at a location. When you ship goods, the cost of goods sold is calculated using each shipped item’s standard cost.
You can change the standard cost of an item at any time using the Location Details form.
Warning! If you ship units of an item for which you have not yet entered a standard cost, Inventory Control calculates the cost of goods sold using a standard cost of zero.
See also
First-in, first-out (FIFO) costing method
Last-in, first-out (LIFO) costing method
Most recent cost costing method