Average Cost Period best option

Comments

• kapil4dynamics Member Posts: 591

  2009-11-13

  First of all why this [-( ? Nothing is best in this, it is dependent on client's business. But if u look at NAV the shorter the period the inaccurate the cost is by the time u do not run adjust cost routine.

  Kapil Khanna

  0
• Kowa Member Posts: 923

  2009-11-13

  It depends .
  Scenario :
  Two purchases on Jan 1st. One for $10, one for $20.
  One is sold on Jan 1st and one on Feb 1st.
  On Feb 2nd third purchase for $30.
  
  Period set to Day : both sales have a COGS ("Cost Amount (Actual)") of $15.
  
  Period set to Month : The sale on Jan 1st still gets COGS $15.
  For the second one in February the purchase in February now takes effect.
  Average cost on Feb 1st $15 + $30 from Feb 2nd divided by the inventory : 45 / 2 = 22.50 => COGS for the second sale. The initial COGS for the second sale on Feb 1st was $15 here too, of course. NAV can't look into the future .The item ledger entry is adjusted to 22.50 when the third purchase is posted and the cost adjustment is run.

  Kai Kowalewski

  0
• vicky_dada Member Posts: 106

  2009-11-14

  My idea of asking you this is for example imagine, when posting an inbound transaction at a certain day (which can also be an inbound transfer), all Outbound entries for that item and location having a valuation date >= that Inbound must be readjusted and this can take a very long time.
  
  Furthermore, outbound entries are never really adjusted unless you close the Posting period per a certain date as they need to be readjusted with each single new posting. Additionally, all outbounds can have countless cost drivers (all having a valuation date <= than their own valuation date).
  
  My assumption is the impact of having a Average Cost Period of Month instead of Day in the inventory setup for Average Cost items as this change might speed up the adjust cost, as all outbounds of the same month get the same Cost.
  
  Please suggest am I on the correct page?

  0