Hello All, This is my first post here and I must say this is a wonderful and very knowledgeable community! One of my clients buys raw fish and he then prepares fillets. This is done 90% with manual labor. He then packages it and stores it in inventory. So he starts of with raw fish, then do a manual process and then ends up with the finished fillets. This is my client in the manufacturing sector, so I am looking for advice on how to cost those finished fillets. I convinced him to process the raw material within 2 days of receiving it, so I don't think I need to cost or value the raw materials or WIP. He also uses Peachtree accounting...but just a basic version. I may have to use Excel for the costing! Thanks! Ravi
Food Processing
Answers
What type of costing system are you planning on using? (i.e. Standard Costing, Weighted Average Costing, etc.)
Hey Neil,
I am thinking Weighted Average Costing. What would you suggest?
I am open to ideas / suggestions!
Ravi
I think it ultimately comes down to the complexity of the manufacturing processes, the changing nature of the costs, and the ability of implementation and management.
If you don't anticipate costs on the materials or labor/overhead will change that often, I'd suggest using the more simplistic standard costing model. This is the easiest system to implement and maintain going forward, since it only requires you to establish the standard initially and deal with the variances as they occur.
However, if you feel costs (materials or labor/overhead) will change fairly often, the weighted average costing system would be more appropriate. It provides the needed flexibility to account for those changes as they happen - so your raw materials and finished good costs will adjust in real time. It can be labor intensive without the help of a system to calculate these changes as raw materials are received and processed to finished goods. It definitely is doable though and a robust excel file could take care of this work for you if built right.
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Accounting