Introduction

Costing in NorthScope is a flexible framework that allows companies to track and manage the value of inventory at a granular level. This FAQ provides answers to common questions about how costing works, including eligibility criteria for items, how and when costs are applied, and the impact on financial reporting. Whether you're assigning default costs, distributing expenses from invoices, or posting to the General Ledger, understanding these fundamentals ensures accurate inventory valuation and accounting integration.

What items are eligible for costing?

An item is considered Cost Eligible if all of the following conditions are true:

• It is included in the Inventory Item Master File (i.e., not a Cost Item or Fish/Grower Ticket Item).

• Its Item Type is set to “Inventory”.

• Its Cost Method is set to either “Active” or “Passive” (not “Exclude from Costing”).

What items are not eligible for costing?

An item is not eligible (excluded from costing) if:

• It is not in the Inventory Item Master File (e.g., Fish Ticket, Grower Ticket, Planning, or BOM Cost Items).

• Its Item Type is AP Expense, Freight, Misc, or Tax.

• Its Cost Method is set to “Exclude from Costing”.

How are costs assigned to Items/Lots in NorthScope?

Costs for eligible items can be assigned:

• From Transactions: Costs from posted AP Invoices or Credit Memos are distributed to applicable lots.

• Manually: Users can manually update costs in the Update Costs list view.

What’s the difference between Active and Passive costing?

• Active Costing:

  • Costs are included in Costing Journal Entries.

  • Impacts the GL via Inventory transactions.

  • Costs are managed per Lot.

• Passive Costing:

  • Costs are visible but do not post to GL.

  • Useful for visibility without accounting impact.

What are Costing Journal Entries?

These journal entries account for Cost Rate changes when:

1. Inventory balance changes for a lot with non-zero cost (Adjustment, Production, Receipt, Transfer, or Sales Order Shipment).

2. Manual cost rate changes are made.

3. AP costs are applied to a lot.

How granular can costs be assigned?

Costs are tracked per Inventory Lot by date. Multiple lots of the same item can have different cost rates within the same site.

An Inventory Lot is unique by combination of:

• Item: The Item ID (required for all Inventory Lots)

• Site: The Site/Warehouse that contains the inventory (required for all Inventory Lots)

• Production Batch: The date code or other traceability reference that stays with product and never changes. It is required for Items with a 'Lot Tracked' property of "Yes" and will be blank for Items with a 'Lot Tracked' property of "No"

• Warehouse Lot: The identifier or location within a Site/Warehouse, this is most typically used for 3rd party distribution sites. It is required for 'Inventory Lots' in a Warehouse Lot tracked Site and will be blank for 'Inventory Lots' in a non Warehouse Lot tracked Site. This has nothing to do with whether the Item is 'Lot Tracked' or not. 

• Owner: Identifies who owns the product. This is required for all Inventory Lots.

For example, if Site 3PL contained 600 lbs of Item ABC, each Inventory Lot within the Site could have a different cost rate assigned if needed:

• 300 lbs: Production Batch 1, Warehouse Lot A100 - Cost: 1.25/lbs

• 200 lbs: Production Batch 1, Warehouse Lot A200 - Cost: 1.45/lbs

• 100 lbs: Production Batch 2, Warehouse Lot A300 - Cost: 0.75/lbs

How are costs assigned to lots created by Transfers?

• Cost history is transferred from the source lots to the new destination Lots.

How are the Item level ‘Default Cost Rates’ used?

1. They are assigned as the Base Cost Rate for the applicable Cost or Market Rates for new ‘Inventory Lots’ created on the following Inventory transactions:

   1. Adjustments

   2. Receipts - Manual (e.g., Receipts that are not against a Purchase Order)

   3. Production Outputs

2. They are not used for new ‘Inventory Lots’ created by:

   1. Receipts against a Purchase Order

   2. Transfer Receipts

How are costs assigned on PO Receipts?

For Active costing items:

1. If AP Invoice exists: Use weighted average from invoice(s).

2. If no invoice: Use PO line item price.

3. If price = 0.00, cost defaults to 0.00.

How are costs assigned on non-PO Receipts?

1. If receiving into existing Lot: Use current Lot’s cost.

2. Else, use Item’s default cost rates.

3. If none, default to 0.00.

4. AP Invoice costs can be manually applied later.

When is the Inventory Balance Sheet Account updated in the General Ledger?

Costs are only updated in the General Ledger, for ‘Active’ costed items in the following ways:

1. When an inventory Adjustment, Receipt, Transfer, Production, Sales Order, or Sales Return is posted that contains costed Lots.

   1. The sequence for Purchase Order Receipts (Receive then Invoice vs. Invoice then Receive) will impact when the balance sheet is updated.

2. When costs are manually applied from the Cost Distribution Record View.

3. When the 'Post Costs to GL ' process is manually run from the Update Costs list view. This process can be run as often as needed but is typically ran at period end.

What does the "Post Costs to GL" process do?

Evaluates the data in the Cost History table and for the ‘Active’ costed items makes:

• Creates journal entries for:

  • Inventory valuation gain/loss for the current On Hand balance.

  • Retroactive updates for each historical inventory Adjustment, Receipt, Transfer, Production, Sales Order, or Sales Return transaction that occurred on or after the cost change.

• Can be run as needed, typically at period end.

How is Market Cost different?

• Cost: Used for GL posting; reflects real expenses.

• Market Cost: Estimated value used in Sales Orders; may include freight, rebates, margin, etc..

What GL Accounts are used in costing?

NorthScope uses specific GL accounts for cost tracking and posting:

• Cost of Goods Sold

• Inventory Balance Sheet

• Purchase Clearing

• Inventory Adjustment

• Inventory Valuation Gain/Loss

• Inventory Production Offset

• Purchase Price Variance

Each is triggered based on transaction type and item costing method.