Item Unit Cost is very high

melsadek

Hey there,

One of our customers has an item that has consistently cost between 51 and 52 dollars per Base UOM. Over the weekend, after cost adjustment ran (as per usual) the Unit Cost for this item has exploded to 12,175.53191 per Base UOM. This is astronomical to say the least. The item uses FIFO costing, and at the moment it shows Cost is Adjusted = TRUE, Cost is Posted to G/L = TRUE.

I drilled into the Unit Cost field and here's the summarized view of the latest entries in the Average Cost Calc. Overview:


I don't know if this applies in this case since this item is a FIFO item, but could the fact that there are only outbound entries on March 1 onwards and no inbound entries in the location titled SSA be the reason for the inflated Unit Cost? In any case, this unit cost is concerning because the system is now suggesting it on all outbound entries (Read: consumption) and now the consumption journal is overstating the value of the components to be consumed for finished products.

A few things to take into consideration:

- Item's ILE and VE show typical Cost Per Unit between $51 and $53. There are no outliers in either ledger.
- I ran the Costing Error Detection report from Microsoft. I got zero pages, so naturally that means nothing got flagged as inconsistent.
- Item has virtually nothing on hand (0.00188)
- Customer uses NAV 2009 R2 Classic with costing ROLLUP 1 + 2
- Automatic Cost Posting = TRUE
- Expected Cost Posting = TRUE
- Automatic Cost Adjustment = Never
- Average Cost Calc. Type = Item
- Average Cost Period = Month

Has anyone encountered a situation like this where very low QOH and very high Unit Cost? What's the remedy in this case? The customer won't post the consumption journal lines until the unit cost is corrected.

Your help is appreciated.

clementina

Hi melsadek did you manage to find what was wrong?

melsadek

Hi clementina,

This inflated unit cost was a direct result of a small residual inventory value against an even smaller quantity on hand. The total quantity on hand for this item in question was 0.00188, while the inventory value (from the Value Entries) was 22.89. To the customer, this was no big deal so we just did an item journal adjustment for the quantity and value remaining and reset them to zero. This resets the Unit Cost (after cost adjustment), allowing us to input new transactions at a proper unit cost.

I recall encountering a problem like this about a year ago as well (for the same customer). I believe this issue comes down to rounding precision. As you can see the quantity on hand was 0.00188, which is the maximum # of decimal places NAV can handle, while on the invoicing side the value was rounding to nearest cent. I think over the course of the lifetime of the item, a lot of fractions of pennies were ignored, while the inventory quantity was being kept very precisely. And that had a cumulative effect on the unit cost calculation.

I hope this helps.