Inventory Valuation based on Last Purchase

n_c_balaji

Hi All,

I have a strange requirement for one of my client.

One of my client is operating in Retail Business. The requirement is such that the Inventory Valuation should happen based on the Last Purchase made or based on the last Direct Cost for the item.

All the Inventory that's remaining for that item should automatically be considered at the Latest Cost. This is because of Customer's past experiences with Average Costing(Legacy).

One possible solution to think of is the Revaluation Journal before making the purchase but there are certain instances where the landed cost is known at a much later time. Also I would like you all to share your thoughts,comments on the possible solutions and also the legal aspects of implementing this.

I would like you all to share your experiences in this and help me to find a viable solution for this requirement.

Thanks in advance,

Balaji

ara3n

What costing method?

The mod that they are requesting sounds like they are artificially increasing or decreased their inventory value. That won't fly by an auditor.

idiot

Legally it's possible, for inventory where fluctuations are high, like crude :shock:

n_c_balaji

Hi All,

Purchase1 is of 10 cartons milk which is at 1 dollar each, then I make a sale of 2 quantities at an average cost of $2,my inventory now has 8 cartons of milk at 8$.

Now again I make a purchase of 10 cartons of milk at $2 each. As per the requirement the Inventory value should be $36 which is actually $28. How do I account this $8 difference.

Legally it's possible if I post Revaluation to my Inventory every time i make a purchase. The 8$ difference goes to the Inventory Adjmt. Acct.

Otherwise there is no way I can account to $8 which is legally incorrect.

But the practicalities of making a revaluation every time a purchase is made has to be taken into consideration.

The question here, is there a operationally effective way of achieving this in Navision that would accomodate this requirement.

Thanks in advance,

Balaji

Alex_Chow

You might want to have a look at Standard Costing. It'll do what you need.

n_c_balaji

Hi Alex,

Thanks for the reply.

I did some cases using Standard Cost. But it does not revalue my older stock to the New Purchase Cost.

The point forward from the new purchase the New standard cost is taken into consideration. In Straight Sale of older inventory at old cost and sale of new inventory at new cost.

Thanks for the option, will do more study on this....

Thanks,

Balaji

ara3n

Using any costing method will not revalue your existing items based on last inventory purchase.

I suggest to make thing a monthly periodic activity where they use reevaluation journal and increase or decrease their inventory value.

Alex_Chow

No, it will not revalue the inventory value for you because it's against all inventory and accounting logic.

The reason I suggested using the standard cost is because that's the only area where you can overwrite the cost on the item card. In your case, you may have to use the Revaluation Journal every day to change their inventory value to the current standard cost.

David_Singleton

n_c_balaji wrote:

Hi All,

I have a strange requirement for one of my client.

One of my client is operating in Retail Business. The requirement is such that the Inventory Valuation should happen based on the Last Purchase made or based on the last Direct Cost for the item.

All the Inventory that's remaining for that item should automatically be considered at the Latest Cost. This is because of Customer's past experiences with Average Costing(Legacy).

One possible solution to think of is the Revaluation Journal before making the purchase but there are certain instances where the landed cost is known at a much later time. Also I would like you all to share your thoughts,comments on the possible solutions and also the legal aspects of implementing this.

I would like you all to share your experiences in this and help me to find a viable solution for this requirement.

Thanks in advance,

Balaji

As mentioned above, what you are trying to do is Commodity pricing and valuing inventory on that. My suggestion is that you turn off inventory cost posting, set costing to Standard Cost, and set "inventory value zero". Now all inventory postings will be just quantity. Now at the end of each month do a manual inventory valuation based on the quantity on hand x last purchase cost.

Trying to revalue costs after every purchase in a retail environment will be a nightmare. So just keep it simple.

n_c_balaji

Hi All,

Thanks for your replies and suggestions.

Revaluation is the solution and there is an option in the revaluation journal Calculate Inventory batch job to calculate the Unit cost (Revalued) based on the Last Direct Cost.

I am using 5.0. I think they have added this option in this version. Works quite well.

Regards,

Balaji