Average Cost Calculation Type in Navision

s_venkatesh78 · 2011-03-29

Requirement :
Navision calculates the average cost by day / by week / by Month. However one of our customer wishes to calculate the average cost by instance.

Setups :
Database : Nav 5.0 SP1
Inventory costing method : Average (for all items)
Inventory setup : Average cost calculation type : Item & location & variant

Scenario :
1st Jan 2011 - Purchase Ramaterial-Item B - 2 Liters @ 10 $ each :
Item B : Average cost / Liter = 10 $ as on 1st Jan 2011

2nd Jan 2011 - Purchase Ramaterial-Item B - 2 Liters @ 20 $ each
Item B: Average cost / Liter = 15 $ as on 2nd Jan

10th Jan 2011 - 10 Am - 1 Liter of Item B is consumed to produce 1 liter of item A (Finished goods) and the cost of consumption is 15 $ (Based on the average cost) and hence the output finished goods cost is 15 $

10th Jan 2011 - 3 pm - Purchase Ramaterial-Item B - 3 Liters @ 25 $ each
Item B: Average cost / Liter = 15 $ as on 10th Jan will be 20 $ after running the 'Adjust cost routine'. Due to the setup (Average cost calculation type : Item & location & variant) the consumption cost of production which happened at 10 AM got adjusted to 20 $ (instead of 15 $) and the output cost again gets adjusted to 20 $

In the above scenario my customer wishes that the production consumption cost should still remain as 15 $ as the receipt was done only after the production consumption is done ie., instead of doing the average cost calculation by Day the average cost calculation should be done at that instance.

Is there any way to do this ?

kine · 2011-03-29

Isn't it better to use the FIFO method?

Alex_Chow · 2011-03-29

You can use the applies-to entry to specify which cost you want th inventory to be consumed at. Assuming you're using consumption journal.

s_venkatesh78 · 2011-03-30

I tried to use the applies to ID. If i use that, system will take that specific costing with respect to the applies to ID item ledger entry instead of taking the average cost.

My users wishes to average costing with the cost calculation at that particular instance and not by day or month.

Alex_Chow · 2011-03-30

The scenerio you described is not average cost. When you calculate the weight average cost by day, you take the costs in your inventory for a particular day as an average. NAV does not keep track of average cost by the hour.

s_venkatesh78 · 2011-03-30

Hi Alex,

Agreed.

But i m just checking is there any way or any customization can be done to make the average costing to work in this way.

Alex_Chow · 2011-03-30

s_venkatesh78 wrote:

Hi Alex,

Agreed.

But i m just checking is there any way or any customization can be done to make the average costing to work in this way.

With modification it's always possible. The main question is do you want to modify the core costing engine of Navision. It's probably better to train the user on how average cost works and the pitfulls of doing such mod (i.e. costing reconciliation will be a nightmare!)

s_venkatesh78 · 2011-05-08

Dear All,

Thanks for the information.

Finally our customer agreed to use Navision standard Average cost calculation per day after seeing the advantage of it.

Average Cost Calculation Type in Navision

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