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Former Member
May 10, 2010 at 01:20 PM

What is the purpose of standard price?

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Hi,

I wonder why do we need to use standard cost estimate to release the standard price for finished goods because why cant we use the price calculated in the cost object controlling. For example :-

Standard price created by product cost planning :- $3

Actual costs collected by the production order = $100 (Total debits)

Lot size = 5 units

If we were to use the standard price to do the credits to inventory then the price of material will be calculated as follows :-

5 X 3 = $15

However if we use this calculation instead where the total costs is divided by the units then we get 100 / 5 = $20 which will reflect the true price of the product. Hence my question is why cant we use this latter method to compute the actual price of the product and update the material standard price accordingly instead of doing product cost planning?

Please clarify this.