Changing the Average Cost Calculation Type

Beatrice

Hi Everyone,

We have a new request from one of our client which is to change the way system calculates average cost on items.

Actually, the system is calculating a single average cost per item for all locations. Now, we have received a new request from our client to change this method and to make the system calculate the average cost per item and per location.

Can someone please advise on the above? What will be the implications and the required configurations for same?

Please note that our client has been using Navision 4.0 SP1 for nearly four years now.

Thanks and Regards,

Bea.

crisnicolas

Take a look at what the help says for field Average Cost Calc. Type Field on Inventory Setup:

Average Cost Calc. Type Field
This field contains information about the method that the program uses to calculate average cost.
Note
If you change the average cost calculation type, only entries in open fiscal years will be affected. Entries that have already been posted in the open fiscal years will also be changed.
The options are:
• Item: If this option is selected, the program calculates one average cost per item in the company.
• Item & Location & Variant: If this option is selected, the program calculates an average cost per item for each location and for each variant of the item in the company. This means that the average cost of this item depends on where it is stored and which variant (for example, which color) of the item you have selected.
Warning
You must choose the type of method very carefully during setup because if you change the contents of this field, all entries concerning items with costing method Average in open fiscal years will have to be readjusted. This may take several hours if your database is large.

Beatrice

Hi Crisnicolas,

Thanks for your reply.

However, I've got few questions about this change in the setup:

1. For entries in previous fiscal years, which are still open, will this have an impact on the cost of goods sold and hence the margin for these previous years?

2. If Yes, do we need to close these fiscal years before changing the Average Cost Calc Type?

Thanks and Regards,

Bea.

crisnicolas

I don't know, I haven't tried it myself.

Alex_Chow

In theory, there shouldn't be a change on your inventory valuation and your previous financials. In reality, I've seen minor rounding adjustments that are made.

You should do a backup of your database and test the process yourself to see what results you get.

hardik_shah

to change method u have to remove all entry from ILE. Takecare in case if your database is too large.

Beatrice

hardik_shah wrote:

to change method u have to remove all entry from ILE. Takecare in case if your database is too large.

Can you please elaborate on the above?

Thanks and Regards,

Beatrice.

hardik_shah

Ya Beatrice....
Beatrice to change the method u have to transfer all your ILE. it will takes time if database is too large...and there is also possibility of damage.

Beatrice

hardik_shah wrote:

Ya Beatrice....
Beatrice to change the method u have to transfer all your ILE. it will takes time if database is too large...and there is also possibility of damage.

I am sorry for that... but i am not understanding. What do you mean by transferring all the Item Ledger Entries? Where to transfer the Item Ledger Entries?

Alex_Chow

hardik_shah wrote:

to change method u have to remove all entry from ILE. Takecare in case if your database is too large.

NOOOOO!!!!

:thumbsdown: :thumbsdown: :thumbsdown:

Alex_Chow

Beatrice,

Alex Chow wrote:

In theory, there shouldn't be a change on your inventory valuation and your previous financials. In reality, I've seen minor rounding adjustments that are made.

You should do a backup of your database and test the process yourself to see what results you get.

We've done this before to our client's database. And the rounding should only be financial impact for each period.

raj2000be

Hi,

Typically this not much of an issue other than time. And as Alex pointed, there is only rounding differences unless the costs are redically different. I would suggest doing this on a back up copy of the database and getting the results reviewed by the accounting staff of the clients before performing in live. In some cases, the results may not be favourable to the accounts.

Cheers
Raj

sundies

Hi,
We are currently attempting to complete this exact process on our TEST DB.
As part of the work done by others did anyone produce a guide on how to complete this process that we could follow?
So far we have updated the setting on the Inventory Setup to make the Average Cost Calc. Type = Item & Location & Variant and this was successful.
We can now see that the Avg. Cost Adjmt. Entry Point table (5804) has cleared the valuation date & created new entries at the item/variant/location level. Trying to run adjust cost is stopping to due the missing entry point date sow e are attempting to set this date manually to the table, then run adjust cost & post cost to GL.
If anyone can provide some guidence on this or confirm we are ont he right track would be appreciated.