Recently we were doing our Cloud based ERP product (www.actouch.com) demo at a prospect’s place at Bangalore. He is an established company of 30+ years and has reputed clientle. As part of the product demo, we took actual product data, purchase price with bill of materials (BOM). We completed the “Finished Goods production reporting” and our prospect had the biggest worry of the day and he was struggling to understand what happened.
Because the cost of his production was nearly 1.75 times more than his selling price. The cost sheet they were referring was nearly 3 years old.
Today, if we ask any SME customer randomly on what is the actual cost of the material he purchases or cost of the product that he manufactures, there is 80% chance that he would give an old price and he might not be knowing the real cost.
This is a common scenario is most of the production units unless they monitor every cost and expenses closely.
“Most of the business owners are not able to identify the exact cost of Finished goods or their purchased materials. Because the age old software that they use doesn’t have the capability to handle these requirements.”
Below we are presenting a scenario of how the Finished goods costs can be deduced based on multiple factors.
Finished Goods Cost breakups
In AcTouch.com, we use weighted moving average costing method that averages out the Purchase cost and finished goods reporting, so that there is no conflict on the costing. These details are tightly integrated with Financial reporting.