Costing Methods in Netsuite
Hi Dear Reader,
This topic is about type of Inventory Costing Methods.
In Netsuite, inventory costing method allow you to choose the way Netsuite calculates the cost of items.
Inventory Costing Method determine how inventory costing calculations are handled for costs related to
same item at different purchase prices over a certain period.
Type Of Inventory Costing Methods:
1. Fist-In, First-Out(FIFO) - Using FIFO, the first goods purchased are assumed to be the first goods
sold so the ending inventory cosistes of the most recently purchased goods. This method is useful to track
different shipments of similar products.
2. Last-In, First-Out (LIFO) - Using LIFO, the last goods purchased are assumed to be the first goods
sold so that the ending inventory costing of the first goods purchased.
3. Average (Moving Average Method) - Inventory costing is calculated as the total units available
during a specific date range divided by the beginning inventory cost plus the cost of additions to inventory.
4. Standard - Standard costing enables you track standard costs for items and to track variances between
these expected costs and actual costs.
5. Group Average - Group average costing enables you to track one average cost for an item across
multiple locations within a defined group.
**** In NetSuite, average costing is the default inventory costing method. If inventory levels are negative,
NetSuite uses the last purchase price as the inventory costing method.
When is item cost calculated?
Using any costing method, the cost for items is calculated based on the cost shown on the transaction that
brings the item into inventory.
Ex: if you use Advanced Receiving and the workflow Purchase Order > Item Receipt > Vendor Bill,
then the item cost NetSuite uses is the cost shown on the item receipt.
Please Note: After the costing method is saved on the item record, it cannot be changed.
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This topic is about type of Inventory Costing Methods.
In Netsuite, inventory costing method allow you to choose the way Netsuite calculates the cost of items.
Inventory Costing Method determine how inventory costing calculations are handled for costs related to
same item at different purchase prices over a certain period.
Type Of Inventory Costing Methods:
1. Fist-In, First-Out(FIFO) - Using FIFO, the first goods purchased are assumed to be the first goods
sold so the ending inventory cosistes of the most recently purchased goods. This method is useful to track
different shipments of similar products.
2. Last-In, First-Out (LIFO) - Using LIFO, the last goods purchased are assumed to be the first goods
sold so that the ending inventory costing of the first goods purchased.
3. Average (Moving Average Method) - Inventory costing is calculated as the total units available
during a specific date range divided by the beginning inventory cost plus the cost of additions to inventory.
4. Standard - Standard costing enables you track standard costs for items and to track variances between
these expected costs and actual costs.
5. Group Average - Group average costing enables you to track one average cost for an item across
multiple locations within a defined group.
**** In NetSuite, average costing is the default inventory costing method. If inventory levels are negative,
NetSuite uses the last purchase price as the inventory costing method.
When is item cost calculated?
Using any costing method, the cost for items is calculated based on the cost shown on the transaction that
brings the item into inventory.
Ex: if you use Advanced Receiving and the workflow Purchase Order > Item Receipt > Vendor Bill,
then the item cost NetSuite uses is the cost shown on the item receipt.
Please Note: After the costing method is saved on the item record, it cannot be changed.
Download Netsuite Guru Android App
Follow us on Linkedin
Our FB Page
When choosing a costing method for your inventory it is very valuable to fully understand all of your options and the impact of such a decision. Thank you for sharing this blog.
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