how FIFO costing method works in NAV

szh

Dear All,

I will like to know how FIFO costing works in NAV. Here is my example from client.

PO
----
26/12/2012 Qty (10) Cost Amount (10)

SO
----
13/01/2013 Qty (10) Cost Amount (-12)
13/01/2013 Qty (10) Cost Amount (2) // The system adjustment created cost amount (2) for this SO.

I really do not understand how the system calculate above highlighted entry.

Thanks
SZH

bbrown

If I'm reading your post correctly, it looks to me like it came in at 10 and went out at 10.

Purchase was for cost of 10

Sale initially posted for cost of 12. (because that was likely the Item "Unit Cost" when sales order was created)

Adjust Cost adjust the COGS back to the correct cost of 10 (adjust 2)

szh

Hi bbrown,

Initially, sales cost was 12 and created direct cost was 2 at the same time in next line. For your information, we are using Auto Adjustment option is 'YES'.

I really do not understand how to understand posted entries why the system adjusted COGS cost to purchase cost (10).

Please advice any idea how the system does.

Thanks
SZH

bbrown

When a sales line is created, its "unit cost" is set to the current "unit cost" of the item. This must have been 12 in your example. So the sales line is posted and the COGS is initially set at 12. During the posting the sale (outbound entry) is linked (applied) to an open positive (inbound entry) using FIFO rules. Meaning the oldest open entry. When when "Adjust Cost" is run, immediately in your setup, the outbound entry is adjusted to match the cost of the inbound entry. Hence the 2 adjustment.

szh

Hi bbrown,

Thanks for your explanation. I will like to verify my understanding whether it is correct , the system posted sales invoice cost (12) first and adjusted (2) to reflect actual cost as PO cost (10) in GL and Value Entries.

Am I understanding correct? Is this how NAV calculate FIFO cost?

Thanks
SZH