COSTINGS, PRICES, STOCK VALUE AND ACCOUNTING
in ALCHEMIST and
in ALCHEMIST and EXACT
CALCULATING COSTS OF MANUFACTURED PRODUCTS
In ALCHEMIST cost calculations may take place in the following instances, depending on settings:
1] Running an ALCHEMIST costing report <Stock><Reports><Alchemist><Products>[Costing].
2] Invoking a manual re-cost of a stock item in <Stock><Maintenance><Products>[Alchemist]<Calculate Product Cost>
This function depends upon a setting in <Stock><Maintenance><Global Settings / Functions><Alchemist Setup><Goods Finished> “Re-cost Product” (Yes or No) – If set to “Yes” every manufactured item will be re-costed at the time of manufacture (Processing the Goods Finished)
and Kits are not costed when running the
is done by default using the last cost of the materials used in
You may, however elect to use a different material cost as the basis for costing. This is achieved by allocating a special Category to the material item that you want to use differently in the calculation.
(See <Stock><Maintenance><Stock Items><Categories>).
category should be set to use a different cost as the basis for
performing the costing of the manufactured
For an explanation of categories see page 5.
For reasons outlined below, one should be very careful when using other costs as the basis for calculating costs of manufactured items.
costs may be calculated separately from the
COSTS AVAILABLE FOR CALCULATIONS OF SELLING PRICES AND VALUATION OF STOCK
In ALCHEMIST and EXACT there are five different costs available for selection:
These are seen in <Stock><Maintenance><Stock Items><Items>(or Products, Raw Materials or Containers)[Purchases / Qty / Cost]
Note that all costs refer to the Stored / Sold in unit
system manager or a user with a similar level of access may access
the costs for editing by
1] Last Cost - the last cost of an item when it was received or manufactured
2] Average Cost - the averaged cost of an item
3] Standard Cost – a “benchmark” figure that can be used to see when other costs have moved significantly
Valuation Cost – a user-edited cost that
may be used for valuation purposes where, for example there is a
Edited Cost – a user-edited cost that
may be used, for example in the case of an imported raw material
where the normal purchase
A mark-up factor may be associated with an Edited Cost and used to automatically arrive at the Edited Cost by multiplying the Last Cost by the factor. This is to assist in automatic maintenance of Edited Costs.
Please note that only the first two costs, above are fully automatically maintained by the system. The other costs must be carefully maintained by the user, although different costs may be transferred to other costs globally by invoking <Stock><Maintenance><Stock Items><Transfer Values>
It can be seen from the above that costing can be done on any costs of materials, but one must be very clear on what cost one is looking at and for what purpose those costs are to be used.
Visualise the following scenario:
may work if the customer buys the
value your stock at average value may not be such a bad idea, but
to base your
It is better to arrive at an average cost of the finished item based on the latest cost of the raw materials at the time of manufacture. You can then base your selling price on this average cost.
idea when determining
In fact, although possible with Alchemist,
average costs of raw materials should never be used as the basis
for calculating the latest costs of finished
Stock may be valued at any of the above costs.
The stock valuation report is found at <Stock><Reports><Standard Items><Stock Value>
Various choices that are self-explanatory may be selected from the reports menu.
valuation is the Quantity on Hand multiplied by the selected cost
means that the user may selectively decide on those
Negative Values in Stock Valuation
Stock may reflect negative values in the following cases:
Materials have been received but the goods received vouchers have
Goods have been manufactured and then sold, but the batches have
3] Decanting has occurred without using the decanting facility. See <Stock><Maintenance><Stock Items>Operations<Move / Decant>
There is stock leakage in the form of theft or un-
Batch sheets have been incorrectly
Stock may reflect incorrect positive values in any of the above scenarios or:
Goods have been returned to stock without the documentation having
It therefore follows that all negative values and all variances in a stock valuation need to be investigated and fully explained. This is something the computer cannot control, and it is up to management to ensure that this is done.
that are sold may have an infinite number of
customers may have their own
Price lists may be based on any of the selectable costings (Last, Average, Standard, Edited or Valuation)
lists may have a mark-up factor associated with them that may be
used to automatically calculate new
Prices are maintained in the following areas of ALCHEMIST and EXACT:
<Stock><Maintenance><Global Settings / Functions><Default Prices> (for creating new price lists and allocating these lists to stock items)
<Stock><Maintenance><Global Settings / Functions><Markups> (Where markup factors may be allocated to the different price lists that may have different stock items associated with them)
<Stock><Maintenance><Global Settings / Functions ><Default Prices>[General] (where new price lists may be created and those that have already been created may be modified)
<Stock><Maintenance><Global Settings / Functions ><Default Prices>[Global Functions] (Where price lists may be allocated to stock items)
<Customers><Maintenance><Prices> (where individual customers may be allocated special prices for selected stock items)
<Stock><Maintenance><Stock Items>Operations<Price Changes> (Where future price lists are generated and existing future prices are turned into current prices after their implementation date)
<Customers><Maintenance><Customer> [Balances] (Where a default and alternative price list may be allocated (over-ridden by a customer-specific price) a selection between VAT exclusive prices and inclusive prices may be made and special invoice, credit note and delivery note templates to allow for customer-specific requirements may be allocated).
Costs that are used as the basis for the calculation of new prices as well as existing prices may be transferred to another cost or price (Selectable by product or product range) by going to <Stock><Maintenance><Stock Items>Operations<Transfer Values>.
STOCK IN ACCOUNTING
For the purpose of analysing business performance the value of stock is of vital importance and therefore the following factors need to be considered:
All discrepancies need to be investigated and corrected, as seen above.
Stock value must be considered in conjunction with creditors’ transactions. For example, it may be acceptable to reflect a negative value for a stock item if there is a concomitant understatement of the amount of money due to the supplier.
report showing the value of all Goods Received where the stock has
been updated but the suppliers invoices have not been
Some accounting packages, notably Pastel, automatically transfer the values of any stock transactions directly to the general ledger.
are of the opinion that this is an extremely dangerous and undesirable
Because of the integration of stock with the General Ledger, every time there a discrepancy in the stock a journal has to be passed in the ledger to correct this. Journal entries are what auditors make their living out of, and the fewer that appear in your ledger, the less they will be able to charge for.
If there is a stock imbalance, it should be corrected in the stock, not in your ledger!
The only analysis of stock that the auditors can do is to do a spot check on quantities on hand. This they will do in any event.
same reasoning applies where you want to analyse gross
Some accountants are tempted to do this analysis through the General Ledger by setting up special sales accounts and stock accounts for individual customers in the Ledger.
As far as we are concerned, this analysis should take place in the customer’s records. After all, ALCHEMIST knows what an item cost at the time of selling it to the customer, and it knows how much the customer paid for it, therefore ALCHEMIST can calculate the gross margins that you make on an individual customer whatever you sell the customer without clogging up the ledger with numerous transactions that your auditor will gleefully charge you for examining.
ALCHEMIST, when you wish to know your
One entry: No clogging the ledger with unnecessary transactions: No audit fee!
ALCHEMIST and EXACT are fully integrated they “know” what a
These reports are obtained from <Customer><Reports>Stock Item Sales<By Customer (Det)>
there has been an error in
Recommended modus operandi
We recommend that you decide how you want to cost the different items in your stock and how you want to value your stock (you can see from the above that ALCHEMIST and EXACT offer you an almost infinite range of combinations and permutations) , then make notes on how you arrive at these results and use these notes as your own “Operations Manual” That way you will be comparing apples with apples each month and will not catch yourself out.
Categories are used to generate and order reports in the Stock, Customers and Suppliers modules of EXACT.
They are also used to perform certain global functions on a set of data, for example, price updates.
Categories are extremely powerful, but because there are 8 positions available in the category code and "wild-cards" may be used, they can also become very complex. Considerable thought needs to go into the setting up of an intelligent category system.
It is much better to set the categories up properly right from the beginning than it is to try and sort out a mess later!
The easiest way to explain categories is to give some simple examples:
If, for example you have a shop selling paint and you sell to cash customers, house-owners, painting contractors, industrial and commercial businesses and farmers, you may want to categorise them accordingly so that you could obtain reports to see where your greatest sales or profits are generated. You may also want to send different mailings to these people to promote special offers, or even to distribute different price lists to them.
So, you may decide to give them the categories CUSTC (this would be specific only to the cash acount), CUSTH (house-owners), CUSTP (painting contractors), CUSTI AND CUSTF respectively.
You may want to further refine them in terms of, for example, whether they have an account or pay cash, thus having CUSTHA, CUSTHC, CUSTPA, CUSTPC, and so on. (A for Account, C for Cash)
You could then print a sales report for all sales to the cash account by asking for a report with the category CUSTC, or you could get the same report for all Painting Contractors by specifying the category CUSTP* (using the * as a "wildcard") , or a report for all Painting Contractors who have an account (CUSTPA)
It is recommended that most customers stick to the above format for customers, stock and suppliers because it is a simple use of categories, however, it is possible to obtain much more depth in reporting functions by employing the following tactics. Be warned however! The following example, if followed to a greater extent than the example, will get very complicated.
Say you have a hardware store that sells Tools, Paints, Electrical Appliances and Cleaners.
You may decide that you want to give these the broad categories T, P, E and C respectively.
You may then decide to further divide the Tools (T) category into Power Tools (P), Garden Tools (G), Spanners (S) and Woodwork Tools (W), so you use the second position in the category code for this and arrive at the codes TP, TG, TS and TW.
Now you decide that you want to break down Power Tools into Drills, Sanders and Grinders, so you get TPD, TPS and TPG.
However, in the Woodworking Tools section, you also have some hand-operated sanding devices, so you may also have a TWS.
These codes are allocated to the stock item(s) that they describe.
Now, if you decide you want a report on all tools in your shop, all you need to do is ask for a report with the category T* (The * being the "wildcard" for anything in any position after the T).
If you want a report on all Tools that are Sanders (both power and hand-held) , you could ask for T?S (The ? is a "wildcard" for a single position).
If you only want the Power-tool Sanders, ask for the category TPS
Note that in ALCHEMIST groups may be used in a similar way to categories, but three groups (PROD, RAW and PACK) are also essential to the correct running of ALCHEMIST. It is therefore better to alter categories, but not to change groups.
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