Updates to standard cost data can be managed by using two different approaches: the one-version approach and the two-version approach. The one-version approach employs one costing version that contains all cost records, consisting of the initially defined costs and all cost updates. The two-version approach employs one costing version with cost records that reflect the initially defined costs and a second costing version with cost records that reflect incremental changes for cost updates. A primary advantage of the two-version approach is the clear delineation and tracking of cost updates in a separate costing version, without affecting the original costing version. The concept of a two-version approach can be used to identify multiple incremental updates, where each incremental update has a separate costing version that contains the incremental cost records.

The difference in approaches can be illustrated for updating standard costs in a manufacturing environment, such as updates that reflect new items or error corrections. As a starting point, we'll assume that a single costing version represents the standard costs for the current year with an identifier of 2008-STD. It contains the current active costs for all items and all routing-related cost categories and overhead calculation formulas that were known at the start of the year 2008. This costing version will be termed the original cost version.

• One-version approach to cost data updates - The one-version approach means that the original costing version 2008-STD will contain all cost records. The cost updates will be entered into the original costing version as cost records with a pending status. For example, the pending costs could be manually entered for new purchased items, or they can be calculated for a manufactured item to reflect corrections. The BOM calculations with the one-version approach do not require a fallback, because all active costs are contained within the costing version. After activating the pending costs, the original costing version 2008-STD will once again contain all of the current active costs.

• Two-version approach to cost data updates - The two-version approach requires an additional cost version that will only contain the updates; we will assume the identifier will be 2008-STD-CHANGES. The cost updates will be entered into the additional costing version as cost records with a pending status. With the two-version approach, the BOM calculations (of pending costs for manufactured items) require a fallback principle because the additional costing version contains only a subset of cost data. The fallback can be expressed as the active costs, or as the specified costing version 2008-STD, because both identify the source of cost data when it does not exist in 2008-STD-CHANGES. After activating the pending costs, the additional costing version 2008-STD-CHANGES will contain the current active costs that reflect the updates, whereas the original costing version 2008-STD will be untouched.

  The two-version approach means that blocking policies for the original costing version should prevent updates. The additional costing version should have exactly the same policies as the original costing version, with the exception of the specified from date and the selective use of blocking policies to allow updates. The specified from-date should be updated with each batch of changes to reflect the scheduled activation date.

  The preceding illustration employed one additional costing version for managing updates throughout the year 2008. More than one additional costing version could be used, such as a separate version for each batch of updates. In this case, the fallback must be expressed as the active costs, because they would be spread over multiple costing versions.