Different locations different costs

Dr_mjh

Hi there,

I would like to know how to do this:

We have different locations and each location has a different cost than the other locations for each item, the problem is when we transfer an item from one location to another the cost of this item will be the cost of this item in the purchase order of this item which happens to be the cost of this item in the tansferred from location not the transferred to location which is wrong.
how can we solve this?

Financially each location must has its own cost for each item.
We are using the stockkeeping unit per location.

Any reply will be appreciated
Thank you for your cooperation

kine

Which costing method you are using? (FIFO, Standard...)

kine

For me too, and in my opinion it is not correct either.

pindev

If you trade let's say with tomatoes.... and you want in each location the tomatoes to have their own color. In red location they must be red and in the white location they must be white.... . The only one way to achieve this if you purchase only red tomatoes (default and unique color from the vendor) is to paint them for every location with different colors (just like the roses in "Alice in Wonderland").
So if you want to acchieve this with the cost, you have to manipulate the items too. Either Item Charge on transfers or Revaluation Journal can adjust the cost in your locations to the desired level.

ara3n

One of our client had asked for the same thing. They used stand costing, and they wanted to have the standard cost of the destination location to be the cost of the intransit. Once the goods has been received at destination the cost would be cost of Stockkeeping Unit. I had to make a modification to handle it. It was simple modification. We Modified Stockkeeping Unit Table to allow to create records for Intransit Locations. That way they could put any cost they wanted.

Dr_mjh

Thanks for all your efforts,

for BlackTiger, First of all the 20£ must be posted to interim account financially. I don't know how Navision handle this.
for kine, what costing method do you recommend?
for BlackTiger again, yes we do trying to do stndard by location.
for Pindev, there is not item charges on the transfer orders in standard Navision.
for ara3n, Is there any other way to do it without customisation. workaround.

Best Regards

Alex_Chow

Dr mjh wrote:

We have different locations and each location has a different cost than the other locations for each item, the problem is when we transfer an item from one location to another the cost of this item will be the cost of this item in the purchase order of this item which happens to be the cost of this item in the tansferred from location not the transferred to location which is wrong.
how can we solve this?

Holy molly, I had to re-read this paragraph 8 times...

Navision will allow you to keep track of cost per location. Just change your cost calculation in the inventory setup to be by location and by variant. The transfer order will use the same cost as the original entry from the location you're transferring from.

If you're looking to add additional cost for in-transit, then you'll need to use item charge to allocate the additional cost to the item.

ara3n

as deadlizard wrote, you need to do a item reevaluation journal and increase the cost on intransit. That's a lot of work.

Alex_Chow

ara3n wrote:

as deadlizard wrote, you need to do a item reevaluation journal and increase the cost on intransit. That's a lot of work.

No, no, no... Just use Item Charge and allocate the cost. Not the revaluation journal.

ara3n

Item charge to allocate the cost on intransit location? How do you do that?

Alex_Chow

When you create an item charge purchase invoice, you have the option to get the Transfer Receipt Lines.

ara3n

And which vendor do you charge?

Alex_Chow

ara3n wrote:

And which vendor do you charge?

If you're transferring goods from a warehouse to another, you'll most likely use a freight or trucking company. Your vendor would be the trucking company.

If you're transporting goods using your own resource, then the vendor would be to the driver by paying them reimbursement for their expenses.

Dr_mjh

How about this;

Using SKUs per location and giving the central location the replenishment system = purchase, and giving the other locations the replenishment system = transfer, and By choosing the cost calculation type in the inventory setup to be per location and per variant. Now each location can have different cost for an item. when you sell this item the variance in the cost will be posted to an interim account (supposed to be) and the profit calculation will be accurate for each particular location.

Any comments will be appreciated

Dr_mjh

for BlackTiger: are you surprised or didn't get it? if you didn't get it I'll explain;

when you an item that has been transferred from location A to location B so the cost is going to be the cost of this item for location B. The Variance between B cost and the actual cost -that which cost you when you purchased this item - is supposed to be posted to an interim account, and then the profit calculation for this particular item is accurate.

I think that this would clear things up for you BlackTiger

Please Any comment will be appreciated

Alex_Chow

Dr mjh wrote:

when you an item that has been transferred from location A to location B so the cost is going to be the cost of this item for location B. The Variance between B cost and the actual cost -that which cost you when you purchased this item - is supposed to be posted to an interim account, and then the profit calculation for this particular item is accurate.

So basically, what you're saying is that items transferred from Location A to Location B should use the same cost as existing items in Location B?

Kowa

If you have a higher cost amount in Location B than in Location A for the same item then you will increase the overall inventory value just by transferring items from A to B. The additonal charge applied to the item unit cost to get the right profit margin will have to be subtracted from the inventory account to compensate this.

ara3n

Right kowa, cause you are basically increasing your asset (inventory) by saying that location B cost is higher than A as you move goods from A to B.
It sounds like gray area, and somebody who knows GAAP could explain the accounting rules, it would clear things out.

Alex_Chow

From what I understanding, you can't just say an item will have an higher cost if it's in a different location unless you have proper paper trail detailing this higher cost.

Of course you'll only need to prove this during an audit... :twisted:

Miklos_Hollender

Whatever you do, make it Indirect Cost - this is the only way it might be correct from an accounting sense. I'd add Indirect Cost to the SKU Card to be able to configure it to work by Location, and customize CU22 to behave accordingly.

Miklos_Hollender

Deadlizard,

you are right, unless it's indirect cost.

hant

Dear all,

I am using SKU to maintain our items in different locations with different cost. I used Revaluation Journal to change the cost for item in one location (standard cost). But when I viewed the cost in SKU card, this was the same as before running the journal. What did I do something wrong? Furthermore, I cannot use Standard cost worksheet to change the cost due to this will update the cost for the item in all locations.

Thanks for your advice.

hant

Kowa

If you post a revaluation journal and run the Report 795 "Adjust Cost - Item Entries", the Average Cost (LCY) should change accordingly. If the costing method "Standard Cost" is used, the field "Standard Cost" is not updated.

To update only standard costs per SKU Card you could make a copy of Report 5855 "Implement Standard Cost Change" , add a request form to enforce the use of a particular location and filter on this in the UpdateSKU function and outcomment the UpdateItem and InsertRevalItemJnlLine Functions. This report could then be called by an additional menu item from the standard cost worksheet.

themave

Programmatically you can do this, but how are you going to explain to your auditor, when he/she ask you to provide backup documentation for the cost of inventory at this location,

you pull out the original invoice for the lower amount, and tell them you bought it for warehouse A, at a lower cost and moved it to warehouse B at the higher cost because that is what you wanted to do.

There is no way to make it fly from an accounting standpoint. You are attempting to artificially manipulate your inventory values. And thus your cost of goods sold.

Once you tell your auditor, you had a programmer change the underlying program to get around the built in functions that would transfer the cost at the correct amount, you are going to cause a huge red flag to be raised.

Next they are going to ask, what other programming did you have done to get around built in controls to manipulate your financial results

You can try and justify it with indirect cost or freight cost, but that is not what you are doing, you are saying just because it is at a different location it cost a different amount. even though you bought it at the lower amount for the other location