Standard cost and overhead for purchased parts


I don’t know how to treat overhead on purchased saleable items (most of our sale items are manufactured). If an item costs £4 and the overhead is 25%, do I enter the standard cost as £4? If so there is a Price Variance every time we purchase that item. But if I enter the cost as £5 there is a problem when I roll Last Direct Cost to Standard Cost at Year End and Standard cost is not rolled up correctly. What is the correct process as a starting point? We use NAV 2009.

Many thanks

If it is a purchase item, why you want to use standard costing? Why not average or FIFO?

Our costing method is standard costing for all items. We wouldn’t want to mix FIFO and standard.



Would you like to record overhead cost ??

Yes, we record the cost through the routine Update Overhead Rate. This works on all items that have a Production Order, but not on Purchased parts.