Use Microsoft Dynamics GP to Get a Handle on the Impact of Spiking Energy Costs on Freight Charges

With seemingly daily spikes in energy costs that in turn impact bottom-line logistics outlays, there is a way to curb incoming product cost volatility - at least in your accounting practices.

A long available but little used feature in GP 10, along with a number of earlier versions, Overhead Applied Cost, lets you include the cost of getting products into your facility - freight, expediting, logistics - into product costs themselves. The benefit: a simpler way of applying freight costs to products cost that is, at the end of the day, more automated than using GP's landed costs functionality. And while the ability to match, for example, a freight bill to a product reconciliation transaction without having to backtrack on procedures doesn't provide a direct match of landing costs to the purchase receipt, it is an alternative method that requires less transaction processing and invoice matching.

For those companies that do want to build incoming product costs into the product cost itself, the process can be relatively simple with few change-management issues to tackle. Essentially the process involves applying Fixed Overhead to the Item using either a fixed dollar amount or percentage of the item cost, a procedure that approximates the landing costs on that item. The caveat: you must use either FIFO Periodic or LIFO Periodic valuation on the Item to utilize the Overhead functionality, and you have to be in a standard (or "periodic," GP-speak for standard) cost environment

To set up Overhead Applied cost on a new inventory item, select either FIFO or LIFO periodic in the Item Card. Then, from the Go To drop down list, select ‘Standard Item Material Costs.' Under the ‘Fixed Overhead' field select either an Amount to be applied or a Percentage of the Standard ...