Understanding the effects of inventory cost rollups
Although you can change the cost of each item separately, cost rollups are more efficient for two reasons:
- Batch processing: Cost rollups let you change the costs for multiple items at once.
- Parent-child relationships: When you roll up costs on an item, Made2Manage changes the costs for the associated parent item. For example, if an assembly includes a particular part and you roll up the costs on the part, Made2Manage rolls up the costs on the assembly,. To view the effects of a cost rollup, you can look the item master or generate a report. You can also print this report before performing rollup. Because a cost rollup can affect so many items, your company should have procedures that indicate how often to roll up costs. For example, you could roll up costs when few items are inventory, when a new year or quarter begins, or when few jobs are in process. You could choose to roll up costs once or twice a year, or multiple times a year. To understand the effects of cost rollups fully, it is recommended that, first roll up costs in a test company.
Cost rollups have two phases:
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Made2Manage replaces standard or average costs of purchased items with average or last actual costs, depending on your costing setup.
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Made2Manage recalculates costs for parent make or assembly items.
Made2Manage always checks the costing setup before rolling up costs and rolls up costs according to those specifications.
When you roll up costs, you post transactions to the general ledger. If you reduce the cost of inventory, you debit the Facility and Product Class Material Variance account and credit the Facility and Product Class Inventory account. If you increase the cost of inventory, you debit the Facility and Product Class Inventory account and credit the Facility and Product Class Material Variance account.