FIFO costing by location?

kdv

Dear Guru,

I have a question about costing method 'FIFO'. I just wonder why system record COGS as FIFO by location instead of by Item. Please see the attached as return result that i got from the system.

What i expect from the system is it should be record FIFO cost only entry type = sale. Otherwise, it looks like FIFO by location.


with best regards,

kdv

bbrown

I'm not sure I follow your question/reasoning. I've worked with a number of systems over the years and this is not a unique NAV approach. In fact I understand this to be a fairly common accounting practice. The cost of inventory in location A should have no bearing on the cost of inventory in location B. They may have different suppliers and therefore different cost structures.

David_Singleton

Actually FIFO is not by location or item, it is by SKU, so Item AND Variant AND Location.

bbrown

David Singleton wrote:

Actually FIFO is not by location or item, it is by SKU, so Item AND Variant AND Location.

Don't forget Lot/Serial numbers. They are also considered in the cost layers. Cost for Lot A are not applied to Lot B.

David_Singleton

bbrown wrote:

David Singleton wrote:

Actually FIFO is not by location or item, it is by SKU, so Item AND Variant AND Location.

Don't forget Lot/Serial numbers. They are also considered in the cost layers. Cost for Lot A are not applied to Lot B.

No that's not correct. Once you use Serial Nos and Lot numebrs, the costing is no long FIFO, it is specific costing. This is also the case if you use reservations or apply specifically to an item ledger entry.

But yes it is an important note to make.

bbrown

I am going to partially disagree. First I would agree to "specific identification" in the case of serial numbers as they are related to a specific piece of inventory. However in the case of lot numbers I see FIFO as a legitimate costing method. There is nothing in the implementation of lot numbers that assumes all inbound entries would have the same cost basis.

David_Singleton

bbrown wrote:

I am going to partially disagree. First I would agree to "specific identification" in the case of serial numbers as they are related to a specific piece of inventory. However in the case of lot numbers I see FIFO as a legitimate costing method. There is nothing in the implementation of lot numbers that assumes all inbound entries would have the same cost basis.

Actually yes that makes sense.

David_Singleton

Mind you I guess we should also discuss bins.

bbrown

David Singleton wrote:

Mind you I guess we should also discuss bins.

Why?

David_Singleton

bbrown wrote:

Why?

Normally when I get involved in a discussion with Auditors, they want the full flow of inventory, both physically and financially before they will sign off. I find many companies use the word "Location" to mean what Navision calls a "Bin", and "Warehouse" to call what Navision calls a "Location" thus when I start talking about FIFO by location the only way to explain this is to then explain bins.

Maybe the auditors you work with are more familiar with the Navision style of terminology.

bbrown

Auditors? Can't remember the last time I spoke with one. I can only hope that someone (somewhere) in the project is. It's sometimes difficult enough getting people to understand the concept of "I don't work for free", never mind basic accounting.

In a prior incarnation (my first 15 years in this business) I dealt with a lot of R&D firms. Many of these were venture capital funded. It was not uncommon to have a group of auditors overlooking everything you did, as they were reporting back to the investors about where their money was going. (How about an upgrade during year-end while your client is trying to meet filing deadlines for IPOs on 3 companies ](*,) )

David_Singleton

bbrown wrote:

Auditors? Can't remember the last time I spoke with one. I can only hope that someone (somewhere) in the project is. It's sometimes difficult enough getting people to understand the concept of "I don't work for free", never mind basic accounting....

Quite a percentage of my work comes form audit and review, so I guess for me its a part of the job.

Being in the Fire fighting business, I need to be able to put out all the fires.

kdv

David Singleton wrote:

Actually FIFO is not by location or item, it is by SKU, so Item AND Variant AND Location.

I just wonder that i didn't use 'SKU' granule and also didn't use variant. why system still not record COGS by Item? do i have to check any setup?


KDV