Standard Costing

ERPNext
8

In my previous ERP career, there was a very different definition of Standard Costing.

Standard Costing meant this:

  1. Each Item had a defined, per-unit Cost Price of $N, between Start Date and End Date.

  2. Whenever stock was modified (receipt, transfer, issue), Inventory was always debited or credited by the Standard Cost Price. No exceptions.

    • As a consequence, formulas like COGS were simple: COGS = Standard Cost for that date-time. No exceptions.

  3. Once stock was posted to the ledger, that Cost Price was immutable.

  4. If you edited the Standard Cost price for an Item, that only applied to future transactions. No retroactive adjustments were allowed.

  5. All the other “components” typically associated with cost, were recorded in non-inventory ledger accounts:

  • Purchase Price Variance
  • Freight
  • etc.

Clients who chose to use Standard Cost were usually manufacturers.

The concept of Standard Cost was limited to the above. Reporting, budgeting, discounts, forecasting? All outside the scope of Standard Cost.

Now, I don’t think this is at all what @umair had in mind for ERPNext. Which is fine.

I just wanted to share my interpretation of the terminology, that I’ve seen during my ERP adventures here in the US.