Actual Costing is the Preferred Costing Method of Manufacturing Companies
Written by Jack Hughes of Synergy
It is no surprise that actual costing is preferred over standard costing or average costing. The VISUAL help menu explains these choices under costing method.
Actual costing in VISUAL allows analysis not only of the gross profit of each order but the cost components (material/labor/burden/outside service) as well. This can be seen in the Gross Profit Report under the engineering /manufacturing menu. This enables throughput analysis as well as contribution analysis. As you may know, throughput is described as revenue less material and outside service cost.
The Gross Profit Report in an actual cost database provides accurate cost/revenue data (summary or detail) with 6 selection criteria as well as your desired range of ship dates.
Inventory/Cost of Sales is valued at FIFO (First in First out) unless the Customer Order or Purchase Order is linked to the Work Order which then results in specific costing.
The standard costs are always available as a benchmark for variance analysis and reporting. These can be seen in the Work Order Master Cost report also under the engineering/manufacturing menu.
Tracking your company’s true actual manufacturing cost is a great way to understand the issues and opportunities you have to reduce costs and generate more revenue and throughput.