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Standard Costing



Kingdee K/3 Standard Costing module is designed for entities with high standard management level. Rather than assigning the actual costs of direct material, direct labor, and manufacturing overhead to a product, many manufacturers assign the expected or standard cost. This means that a manufacturer's inventories and cost of goods sold will begin with amounts reflecting the standard costs, not the actual costs, of a product. Manufacturers, of course, still have to pay the actual costs. As a result there are almost always differences between the actual costs and the standard costs, and those differences are known as variances. These variances will be booked to P&L. Standard costing usually runs together with Purchase, Warehouse modules. Besides that, it can also be integrated with Manufacturing Order (MO), Shop Floor Control (SFC), General Ledger and Payroll modules in order to provide an overall data integration and analysis solution.







1.Standard cost generation

You may apply standard cost management on specified material, specified manufacturing order or manufacturing operation. For purchased material, standard cost is standard purchase price and is maintained in the system manually. For manufactured product, standard cost is the result of a roll-up from standard BOM, standard routing, etc. System can do roll-up automatically so as to help you improve the efficiency of standard cost calculation. Standard cost explosion report displays the detailed composition of standard cost like direct material, director labor and overhead.


2.Standard Costing

All the stock-in and stock-out transactions are recorded based on standard cost. By generating journal entry at the moment transaction takes place, managers can query cost report in a real time manner. This makes it possible for managers to be focused on key problems, seeking root cause and therefore taking measures to improve cost control.

3.Variance Analysis

Cost variance analysis reports display variance between standard cost and actual cost. Variance will be a debit or credit item of overhead. Variance can be logically classified into two types as price variance and quantity variance. On the other side, it can also be sorted as purchase variance and production variance from the point variance happens. Purchase receipt variance report displays PPV (purchase receipt price versus purchase order) and IPV (purchase invoice price versus purchase order). Production variance report breaks down production variance into direct material variance, direct labor variance and overhead variance. Abundant variance analysis reports make it easy to track cost variance and evaluate performance of production department. To comply with the present Chinese accounting and tax regulation, standard cost can be reverted into actual cost by allocating cost variances that have been booked to P&L to inventory, sales and WIP cost at a lump-sum level.


4.Cost Assessment

System provides abundant reports to analyze variances between production actual cost and standard cost. These reports help cost controller track source of the variance and help entity improve cost control level.

5.Cost calculation for new product

System provides a tool to roll up standard cost of a new product according to cost BOM, routing and purchase price of the raw material. The result of roll-up can help you pricing new product and make cost-quantity-benefit analysis.

6.Standard Cost Adjustment

Standard cost can be adjusted yearly or ad hoc. Once the standard cost of an item has been updated, the system will automatically revaluate the inventory and WIP cost and post the revaluation to GL. The history of standard cost change is kept in the system.

7.Tolerance control

For the variance between standard cost and actual cost, a tolerance level can be set to indicate the acceptable variance range for one works order. This feature differentiates the normal variances from abnormal variances, and therefore would help to control the usage of raw material, to reduce unnecessary waste and unreasonable production cost so as to improve the cost control level.


8.Multiple cost types

It is possible to build multiple cost types with different BOM, routing, etc. and make a comparison between these cost types. By simulating standard cost, you can compare standard cost of your company with standard cost of benchmarking company and derive information for operating analysis and management decision-making.