Brutal change of costing method FIFO & specific to average

fellowes

I plan to "brutally" change the costing method by code unit.

Method who propose to create entries to set the qty of stock to zero then set to initial qty cause others problem. Creating new articles is even worse.

I made some test. The new costing method will be applied to new entries. They are some excpetion like when posting a credit memo (or additional charge) related to an entry done with "old" costing method.


Apart from that this seems to work.

My worry is does I have a risk of blocking the adjust cost - item entries.

Does anyone know or have experienced that ?

ara3n

what version are you on?
Is your avg costing by item/loc/variant?

Average cost is calculated based on history of the item. So new avg cost will be effected by historical records.

The question is do you want to readjust all the outbound entries with correct cost (average for that period) ?

ara3n

What is the reason that you are moving to average?
Usually we recommend against being on average. It had a lot of issues all the way till 4.0 sp3.
In 5.0, they rewritten it but it ran slow for Monthly costing period. Especially if you had lot tracked items.
If you also go negative, you'll get unexpected results (Although calculation makes sense).

fellowes

ver 4.0 SP1

The average cost is per item. Not item/loc/variant. One problem solved.

I am interseted in applying new costing method to entries (puchase, sales and other + and -) done after the "brutal" change.

I made some test after changing the costing method. (I ran the adjust cost - items entries after). It seems to me that :

- If I sell items after setting the valuation method to average. they leave the stock at the average price of the remaining stock (of course this price was calculated using FIFO) despite the fact that quantities were entered using FIFO.

- In fact all buying and selling use then the average method.

- Average costing method is applied to new stock movements.

- No rollback calculation is made. I mean no calculation done from the first entry. No calculation on the past.

- The only thing I seen which does not function properly is the booking of a credit memo (or other adjustment) related to a purchase invoice which concerned items entered by the time that FIFO was used and concerning items that already left the stock. In this case, this adjustement is not apllied proportionnaly to all items remaining in stock. The cost goes to P/L immedialy. This is not "standard" average. But this is not significant.

My concern is : Will I crash (or block) the system next time the adjust cost - item entries or post to G/L will be run on the whole stock ?

Regards

Fellowes.

ara3n

adjust cost in 4.0 looks at avg. cost entry point table for outbound entries to be adjusted. Once adjusted it deleted the record.
This has been changed in 5.0 and now the records stay but a boolean flag (Cost is adjusted) that determines if adjust needs to readjust the Period.
I believe when you upgrade Nav will readjust all the entries.

I suggest to readjust all the historical records so that outbound entries (COGS) transfers leave inventory at average. You'll see a lot of adjustment entries, but at least you will truly have average cost item. To do this, you'll need to insert records for items at every date that you've purchased/ sold something into avg. cost entry point table.

Otherwise you'll have to bring inventory to zero. Inventory value to zero for a day and then post the positive adjustment on next day with value. That way your history will not affect your future entries.

You Unit cost on Item card is equal to sum of all value entries (sum("Cost amount (Actual) ") +sum("Cost amount (Expected)")) / sum(Quantity ), which will be different. So adjust cost will always readjust all your sale entries.

As far as credit memo concerned, if it's direct application, Navision does not take it into consideration part of costing Period. Same applies to drop shipment entries.

ara3n

you have to realize that if you go avg costing by Item, you cannot run inventory valuation report and filter by location.
The report will not make sense.

fellowes

Re : reproting by location
Of course but they assume that costs are proportionally to quantities and that there are no differences depending on the location. This makes senses if all your locations are in the same warehouse for example.

ameen

Thanks Rashed,


I would like to know one thing, are u suggesting to us regadring

DONT USE AVERAGE METHOD.




Please let me know.

fellowes

Thank you for your answers. I understand I will not have a perfect average cost.

Do you know if this will result in blocking the system.

ara3n

The system won't be blocked. It just when the customer doesn't understand why things don't add to GL that you have to explain how the inventory value is calculated and it will be difficult.

ara3n

ameen wrote:

Thanks Rashed,


I would like to know one thing, are u suggesting to us regadring

DONT USE AVERAGE METHOD.




Please let me know.

Average costing has many disadvantages.
Going Negative on inventory will give you unexpected Cost amount on outbound entries.
It's bad for manufacturing. A lot more adjustment entries.
Adjusting Average cost item is slower when running adjust cost process.
making a mistake on one document can screw up your average cost. I've seen a lot of this. Customer posted a PO with wrong amount and your average cost is screwed.
Selecting an earlier posting date on an outbound entry than the Inbound entry causes unexpected cost amount. It's essentially same thing as going negative.
Has not worked correctly and in previous versions. 5.0 has done many improvements, but there are still fixes for it in 2009 and are additional fixes after 2009.

fellowes

I hope it will no come to strange cost like x time more or less the real cost. If some difference, not problem as we need a PhD in mathematics in order to verify the calculation of the cost as soon as there is more than 3 entries. :-). Moreover your explain yourself that this method is the hardest to follow, has strucural problems...

Did you heard of a method in order to correct "broken" unit cost ?

Example the unit cost is in NAV 845,666.45 but inbound cost are be between 150.00 and 200.00.

We would like to "enforce" a corrected price like the "last unit cost" for examlpe. This should be done at user request and item per item when strange values are seen.

asking

ara3n wrote:

To do this, you'll need to insert records for items at every date that you've purchased/ sold something into avg. cost entry point table.

How, it's primary key will never allow you ? It is a mammoth task. :shock:

ara3n

if record exists, you dont insert.

For every unique item,location, date you insert a record.

post some transaction in cronus with avg cost item and see how it works.

asking

ara3n wrote:

if record exists, you dont insert.

For every unique item,location, date you insert a record.

post some transaction in cronus with avg cost item and see how it works.

I tried on Cronus it looks it will not ever reapply history. [-X

So fellow was right on this: No rollback calculation is made. I mean no calculation done from the first entry. No calculation on the past.

Just imagine if we bring the data for all unique outbound entries in entry point table. What about data coming on later dates. :?: So this goes out.

Even if we bring all the records by modifying the entry point table by bringing in Entry No. from value entry along with it to skip primary key issue, it will never go back and re-adjust the outbound entries.

ara3n

adjust cost will adjust the outbound entries. There are a couple flags that adjust looks like.
It was discussed in previous post.

asking

ara3n wrote:

adjust cost will adjust the outbound entries. There are a couple flags that adjust looks like. It was discussed in previous post.

Believe me I tried this by setting Cost is Adjusted as False and brought records in Entry Point table, the way I saw on other posts . It didn't do the adjustment for Sales or an entry where quantity is <0. It works for 5.0 and later as this table keeps the record that I tried and it worked :thumbsup: .

Sorry for being obsessed with this topic but I want to see if we change to Average Cost can we go back and readjust the entries where qty <0. :-k

If you feel bugged please tell me I will stop asking these stupid questions.

ara3n

std nav adjust cost routine doesn't fix the cost on negative inventory. You can try and direct apply using application worksheet for the sales to the purchase and reset the flag so that adjust cost runs again.

I haven't tried it but it might work.

kapil4dynamics

It does for example in FIFO i post a Sales Order with negative quantity entry no. 1 and post another Sales Order entry no. 2 with positive quantity Adjust cost does apply each to the other. Same it will do in vice-versa case. As it (if i am right) checks just a boolean positive to identify inbound i.e. all, if not then as per NAV it is outbound. Then it will use costing method to make the adjustment.

I think on 4.0 it is not possible for going back and adjusting cost entries means Outbound to Inbound if using avg. I did try this futile activity few days back it brought my Unit Cost and Average Cost equal for all the entries. NAV posted adjustments in VLE such a way that the unit cost in ILE was equal to first inbound entry posted in ILE for the item. So all the ILE had same unit cost but for all inbound entries. As even i took data in Entry point but in 4.0 no use.

Reason being it keeps the record for any inbound entry but one which has the youngest valuation date. Once u run adjust cost, gone from table. Then again by the time u do not run adjust cost it will keep the record with the youngest date. But this (bold to happen) u shud have never in ur Automatic adjust cost selected in Inventory Posting setup else it will follow the period which u give but in that case as well for ex. in case of week first date of week will be kept as a record.

Though i did take only unique records in entry point and i have mentioned in a post as well but taking data in entry point didn't help which i assumed shud have. I just set 1. Cost is adjusted true and 2. online Adjustment true i did 3. applied entry to adjust to true as well but didn't make sense for some items as there was no application. Without 3 <edit> as well 2 the avg cost could have been achvd. but for avoiding 2 i shud have had anything not equal to never.

So i don't know, may be asking is spending too much time on a subject where he may get nothing , pls note i might be wrong. Continue ur R&D and if something comes out update here.