As shown in the image above a "Costing Rule" can be defined and assigned to an organization for which the cost of the transactions need to be calculated.
There can only be one rule valid at a time for an organization which besides needs to be a "Legal Entity" organization type. The valid time period of the costing rule is set by the Starting Date entered.
Once assigned the costing rule applies to every product transaction recorded on the Legal Entity and all its children.
The main property to set in a costing rule is the Costing Algorithm to used while calculating costs.
The Standard and the Average algorithms are available by default. Additional algorithms such as FIFO, LIFO can be implemented by extension modules.
Moreover, costs are calculated at organization level by default, however it is also possible to have the costs calculated for each Warehouse's organization.
This can be achieved by using the Warehouse Dimension flag of the costing rule.
Costing rules need to be validated to start using them. That is done by using the button "Validate Costing Rule".
Once a Costing Rule is validated it is not possible to modify or delete it.
If a costing rule needs to be change that is get by creating a new costing rule with the new setup required.
Let's imagine that an organization requires a new costing algorithm to be used for cost calculation. In that case a new costing rule needs to be created.
The new rule overwrites the existing one starting from a new and later "Starting Date".
In this case:
- it is necessary to close the existing costing rule, that means to close the inventory valuated at the "old" rule
- and to initialize the inventory which will be valuated at the "new" costing rule starting from a given date
The closing and initialization inventory balances are managed as Physical Inventories in the new costing engine.
Two physical inventories are created for each organization and warehouse the costing rule applies to:
- the closing physical inventory empties the stock of products, therefore the Quantity Count is set to 0.
The cost of the products is the one calculated using the costing rule configured so far, regardless it is not shown in the physical inventory.
- The opening inventory fills in again the stock, therefore the Quantity Count is once again set to the Quantity on-hand.
The cost of the products is shown and it is the one calculated using the costing rule configured so far.
Note that the cost of the new transactions of those products will be calculated by using the new costing rule.
The costing rule validation process does several checks:
- for instances managing cost which have not been migrated to the new costing engine will not be able to validate costing rules
- for instances do not managing cost do not need to migrate therefore will be able to create and validate costing rules
- and finally, for instance already managing cost under the new costing engine infrastructure:
- in the case of products included in transactions which were cost calculated using a rule, if a new rule is configured all their transactions need to be calculated first according to that previous rule.
- in the case of products included in transactions which were not cost calculated by any rule, if a new rule is configured all their transactions must not be cost calculated.
Fix Backdated Transactions
As already described a costing rule can also define whether backdated transactions booked for a product need to be fixed therefore the corresponding backdated transaction cost adjustment are created and booked for that product in order to get the correct cost of the product.
To make this work, one of the following two actions can be taken:
- use an existing and validated Costing Rule.
This way fix backdated transactions feature gets activated by using the process button "Fix Backdated Transactions".
This option allows entering a "Fix Backdated From" date as starting date, before running the process.
- create and validate a new Costing Rule.
This way fix backdated transactions feature gets activated by checking Backdated Transactions Fixed check-box and filling in a Fix Backdated From date before validating the costing rule.
- "Starting date" of the costing rule will be set as "Fix Backdated From" date whenever the end-user does not enter a "Fix Backdated From" date.
- "Fix Backdated From" date needs to be a valid date within an open period.