Standard
and Average Costing Compared
Cost
Management offers two perpetual costing methods: standard costing and average
costing.
Average
costing is used primarily for distribution and other industries where the
product cost fluctuates rapidly, or when dictated by regulation and other
industry conventions. Average costing eliminates the need to set standards.
Average costing allows you to:
value
inventory at a moving weighted average cost
track
inventory and manufacturing costs without the requirement of having predefined
standards
determine
profit margin based on an actual cost method
measure
the organization's performance against historical costs
include
all direct costs of manufacturing an item in that item's inventory cost
Standard
costing is used for performance measurement and cost control. Standard costing
allows you to:
