Zero Unit Cost at item card

tro#1

All,

we need to revalue/ depreciate some inventory for certain items down to zero. If we do so the item still shows the previous unit cost at the item card.

May I give an example?
Report Adjust Cost and Posting to G/L was started after each transaction.
We are on 4 SP3.
Items have got costing method FIFO

Purchase and invoice 10 pieces for 10 Euro:
Inventory Valuation Report: Quantity 10, Value 100 Euro - correct
Unit Cost at item card shows 10 Euro - correct

Revalue inventory: Unit Cost (Revalued): 6 Euro
Inventory Valuation Report: Quantity 10, Value 60 Euro - correct
Unit Cost at item card shows also 6 Euro - correct

Revalue inventory: Unit Cost (Revalued): 0 Euro
Inventory Valuation Report: Quantity 10, Value 0 Euro - correct
BUT
Unit Cost at item card still shows 6 Euro

We expected the item card to show zero. Since the unit cost should be: Inventory Value of items on hand (expected cost + invoiced cost) / Quantity on Hand

So the users have to run the Inventory Valuation Report to see that the actual value of the item quantity is zero. Is there no chance to see the cost at the item card at first sight?

Thank you for all ideas.

Alex_Chow

What version are you using? By default, NAV does not update the Unit Cost field if the total value is 0. This is to preserve the historical unit cost once the items is out of stock.

In prior versions, there was an Average Cost field that was calcuated. They've taken that out in the newer releases.

tro#1

We are on 4 SP2. So we still have the field "Average Cost". So far I have just ignored it since I thought it was only relevant if the Costing Method was "Average".

But you are right - it shows the needed information:
I did several tests:
Average Cost and Unit Cost is the same
except
if the value of the item quantity is zero.
Then the Unit Cost still shows a value but the Average Cost is zero.

So I will tell the users to check the field Average Cost instead of the Unit Cost.

What also confuses them:
When they later write off the item physically (negative adjustment or physical inventory journal) then also the Unit Cost of the Item Card is suggested in the item journal line.

It is also posting values (value and G/L entries) which finally zero out (Adjust cost - Item Entries / Post Inventory Cost to G/L). Nevertheless it is confusing to see that the unit cost in the Item Journal line gets filled even though the item value is down to zero.

But I guess we/ the users have to live with that and just need to believe in Navision and that everything gets posted correctly nevertheless.

Alex_Chow

tro#1 wrote:

What also confuses them:
When they later write off the item physically (negative adjustment or physical inventory journal) then also the Unit Cost of the Item Card is suggested in the item journal line.

It is also posting values (value and G/L entries) which finally zero out (Adjust cost - Item Entries / Post Inventory Cost to G/L). Nevertheless it is confusing to see that the unit cost in the Item Journal line gets filled even though the item value is down to zero.

But I guess we/ the users have to live with that and just need to believe in Navision and that everything gets posted correctly nevertheless.

This is done to prevent 0 expected cost postings when you sell an item that you do not have inventory for. When the item arrives and you receive it in, the adjustments to your financials wouldn't be that great.

For most companies, selling 0 expected cost item creates a huge financial impact before the actual item comes in.

tro#1

Thank you Alex for that explanation.

Alex_Chow

tro#1 wrote:

Thank you Alex for that explanation.

You're welcome!

fdillens

That the Cost Adjustment keeps the unit cost as it is when the stock balance in null in quantity and thus value is thoughful, so that a subsequent positive adjustment (if some stock is uncovered) gets a meaningful cost by default.
It also allows an outbound transaction to get a meaningful cost immediately and not only after running the cost adjustment.

But what if the stock balance is null in value only, due to a revaluation/write off of that item's cost.
Then the unit cost coming by default on subsequent positive adjustments or outbound transactions should be null.
That's an issue on positive adjustments, that don't get adjusted by the cost adjustment, but that's also an issue on negative adjustments when the users would like to have an idea of the overall cost impact before posting.

I am thus tempted to amend the cost adjustment program to effectively reset the item's unit cost to 0 when a stock has a balance in quantity but a null value, but don't want to try that on the particular company having the issue.
I am thus asking if anyone has dared doing it before?

Gilbert_Lowell

fdillens wrote:

That the Cost Adjustment keeps the unit cost as it is when the stock balance in null in quantity and thus value is thoughful, so that a subsequent positive adjustment (if some stock is uncovered) gets a meaningful cost by default.
It also allows an outbound transaction to get a meaningful cost immediately and not only after running the cost adjustment.

But what if the stock balance is null in value only, due to a revaluation/write off of that item's cost.
Then the unit cost coming by default on subsequent positive adjustments or outbound transactions should be null.
That's an issue on positive adjustments, that don't get adjusted by the cost adjustment, but that's also an issue on negative adjustments when the users would like to have an idea of the overall cost impact before posting.

I am thus tempted to amend the cost adjustment program to effectively reset the item's unit cost to 0 when a stock has a balance in quantity but a null value, but don't want to try that on the particular company having the issue.
I am thus asking if anyone has dared doing it before?

I am sure this was answered a long time ago, but if you have the Unit Cost reset to null every time you have zero stock, then that means that your expected cost and actual cost will equal null.

As stated above, that would have a HUGE financial impact because you would be understating your actual and your expected unit cost which would greatly affect several accounts associated with inventory.

Alex_Chow

Do whatever you want based on your company's requirements. If your CFO agrees with you, do it.