Hi,
I take the following as the most common scenario when it comes to standard costing:
- Finished goods, this is, goods that go through a manufacturing process: standard cost
- Raw materials, this is, purchased materials: FIFO
For these raw materials we still need to determine their standard cost so when they are used in production orders, the standard costs will be used on the estimates and the actual costs will be the calculated by FIFO. Correct?
If so, what happens if the purchased raw materials are costed as well to standard cost? Does that mean we will not have price variances in production orders? How is then the actual cost calculated for the raw material? Does the system trace back to the actual transaction and takes the actual price on the purchase order that brought the raw material into our stock??
Thank you very much for your insights!
