The organizations need to monitor the inventory costs on constant basis for controlling the whole business operations. For this detection, accountants suggest cost variance analysis. This analysis helps the organization get a clear picture of inventory. Generally, it is a long manual process, but if you want to perform this duty in a smart way, Sage 300 ERP in Middle East helps you get accurate results.

Variance analysis is a part of ratio analysis through which the companies forecast the situation and compare with the actual performance. Variance analysis is actually the difference in the standard and actual costs. Standard costs are defined by the organization at the start of the period for getting good output. For calculating material cost variances, there is a need of multiple factors that contribute to the final analysis. Material price and usage variances are the major ingredients to calculate inventory cost variances.

In the current business world, the management wants to involve in the costing for controlling over expenses and estimating the future costs. Sage 300 in Middle East provides you the option of tracking cost variances. You need to configure the analysis through the following steps:

  • The first step is to get access to inventory control category.
  • Now you need to configure cost variance through the inventory control page. You need to adjust cost variance values here.
  • Selection of items for categorizing and mapping of standard cost account is a next step. This selection is very important for standard costing method configuration.
  • In the inventory control, you will have IC items and price list. You will go into it and fix the standard costs for the specific items.

To understand the variances, the following example will help you a lot understand how variances work with Sage 300 ERP.

If we fixed a standard cost of AED 100 in the system but due to the unstable business environment, there was a decline in price. And we have purchased the item in AED 95. The difference in between the standard cost and actual cost is AED 5, which will be considered an inventory cost variance.

Cost Analysis and Inquiry in Sage 300 Accpac can help you keep track of your costs, inventory costing and projections for sale and planning for purchase.

The management considers cost variance analysis vital and if they will calculate it, with Sage 300 UAE, the purpose of improving efficiency will be achieved. This system helps the organization to analyze all the factors, take decisions for the improvement in the business operations and increase the profitability of the company.