Note that the costing is currently redesiged to support LIFO, FIFO

Using different costing methods (Standard, Average) can result in different financial results. Compiere supports using more than one costing method, e.g. for legal accounting and business decision-making.

Compiere maintains the information for the following costing methods

• Standard Costing
• Actual Costing
• Average

but only one of them can be used for accounting in your Accounting Schema. You may switch the used costing method any time. Even though only one method can be used for accounting, the information is very valuable to compare trends. Costs are maintained in your accounting currency. Check details .

Standard Costing

In Standard Costing, you maintain a standard price and accumulate the differences to the actual costs over time. Due to changing prices, it is required to set a new standard price periodically. The new standard price can be set manually or from sources like

• Current Average Price
• Last PO
• (Purchase) Pricelist

When an item is received, it is posted with the standard cost price. When the matched invoice is posed, the difference between the standard price and the actual price is posted to a standard cost differences account. If you later receive product related credit memos or early payment discounts, or realized currency gain/losses these amounts are also posted to the cost difference account. The balance on that account reflects how close your standard cost price matches the actual costs.

Actual Costing

The actual costing price is adjusted when you receive products with changed costs.

When an item is receive, it is posed to the selected actual cost price. If there is no current actual cost price, the standard cost price is used, or if that does not exist either, the purchase order price is used. When the matched invoice is posted, the difference between the used cost price and the actual price is posted and the costs are adjusted. If you later receive product related credit memos or early payment discounts, or realized currency gain/losses these amounts are also posted to product account.

One major issue in actual costing is correcting the costs, if the product has been sold before receiving the invoice. Compiere does not retroactively adjust the costs used in the receipt and sales transaction, but adjusts the actual cost price for future use.