Dynamics 365 Business Central: Item Costing, part 11

Dynamics 365 Business Central: Item Costing, part 11

Hey everyone!

We're going to extend the discount on the classroom training that we're offering, so please check it out if you like getting into a classroom setting, learning about Business Central, and going through all the things that we're going through on YouTube.

But it's going to be more back and forth. So if you’re interested in that then please go on there, check it out, sign up and enjoy learning about Business Central. So one more week.

Back to costing, yay.

I got a comment! So I'm really liking that people are getting into this costing.

I thought I had lost everyone by this time. You know we're up to ten videos, and the same topic, so I thought we didn't have that many left watching.

But there are really hardcore costing people out there! They are following and commenting, so thanks for that!

One comment came from Stefan, and we're going to basically do a video about what he talked about in the comment.

So there's two things that are important. First of all in the FIFO, but we're posting in FIFO, we basically have the coffee mug, the FIFO coffee mug, and we're posting entries.

These are the item ledger entries on there. Then each entry here has entries. And those are called value entries. So each one of the item ledger entries has value entries.

There could be many right and the item ledger entry is basically telling you the quantities that are moving, so as you're buying the quantities, increase, and you're selling the quantities decrease, the value entries are telling you the cost of those quantities.

For example, if you have a purchase order here, so this is a purchase for 50, the direct cost could have been like $1000. Then you might have had freight come in and you wanted to add the freight through item charge onto this transaction. Which could have been $100, so a $100 comes in the value entry.

Now the total cost for this purchase here is 1,100. This could have happened at a different date, so the value entries are very important in describing the cost of the actual transaction.

Now, when we do FIFO and we're just doing basic FIFO. Let me just clean this out. There is a quirky thing that happens with Business Central, very quirky. Basically what goes on is, if you have a purchase order here, for let's say 100, and basically you posted 1000 and then you have another purchase order. And this is this is our example for 100 and you posted 1100. And total.

The unit costs here is 10 and the unit cost here is 11, but the average is 10.5

So the average here is 10.5. When we post a sale for 50, and this is FIFO, or first in, first out.

It should take the cost from here so it should be $500 dollars, and it does do that because it takes it from the first one. But what happens in the value entries is not 500. 

What happens in the value entries is that it actually posts the average first. Which I believe is 525. Then an adjustment of negative 25. Bringing it down to 500. So the sum of these is 500. 

This is the direct cost and then adjustment, and it's funky. It's posting average and then fixing it to become a FIFO. It's just the way it is.

That is one thing we're going to show you in the system.

This applies to that transaction and that's why it's 500. You can come into the system after all this posts and say take away this application and apply it to this one. Because I want to.

You can use something called an application worksheet to do that.

Now, that is a little bit deep but since Stefan brought it up, I wanted to show it.

It's used for extreme circumstances and it can really mess up your system if you do too much of it. So use it with care. But it’s interesting, super interesting.

So enjoy and let's take a look at the application. 

Okay so let's take a look at the application for this. 

if I go into my items and look for the FIFO coffee mug, where'd that go, right here.

The point that was made is, if I go in to navigate, history, entries, ledger entries, I haven't spoken a lot about this, but we have the item ledger entries and underneath the item ledger entries we have value entries.

The value entries are what make up the cost. So the item ledger entries are following the quantities and the value entries are giving us the cost. The value entries, basically the sum of all values makes up the cost amount here.

So if I drill into this cost, actually I'm going to go into the 500. You can see that we have two value entries here. one is for $525 and the other one is for $25 positive. 

So five $525 negative and a $25 positive. Which sums up to be 500.

The second one here is an adjustment. It actually is adjusting the cost. It posts the 525, and since that doesn't really apply to FIFO, because FIFO would be 500, because we are taking out of this one here. We're taking 50, so it should be 500, but it posts 525. Which is average.

Then it fixes it with an adjustment, 25. Taking it into FIFO. Technically the system is posting average and then fixing it with cost adjust to become FIFO.

It's an important note that's also a behavior of Business Central. You might be surprised that you get this adjustment in here. What's that all about? 

Basically the system is fixing itself into a FIFO scenario.

Another point which was made, which was great, and thanks for the comments again, was that you can override the way the system is making applications.

It's a bit hairy when you try to do that. You can get into sort of a little bit of a craziness.

But I'm going to show you how you can do that.

You can see here that this 50 is applied to the 100 first here, and then this 100 right here is taking the rest of the 100, and then 50 here.

You're sitting with 50.

Let's say, for example, that we wanted this 50 here, to come out of this, and not this.

We wanted it to take out the 50 that are here  and I want to do that manually.

I want to change the way the system is applying, so it will technically not be FIFO. It will be my manual application scenario of this.

This is getting a little bit deep but let's just take a look at that.

We can go into something called application worksheet.

The application worksheet has to do with inventory and it's a pretty neat little thing.

If I go into the item here, filter on my FIFO mug, and then I get all of the entries for that, just like we saw before.

I can actually then go into navigate, into the value entry. I'm actually going to take a look at this one here, because I want to open that up. I want to change this shipment from taking from the first one here, to take it from the second one.

Basically increase the cost of this. I go in to navigate, entry, value entries, and I can see that this has been applied already. 

I have to probably do it from here. So let me just go ahead. Entry, value entries.

What I'm looking for actually here, is that I can open them up, or unapply them.

Basically I want to go into the sale right here. Go in to navigate, view applied entries. What is applied to this, and that's the purchase.

I went into the shipment of these 50, here behind. I asked what is applied to that and I see this purchase receipt, and that's for 1000.

I'm looking at the applied entry to this particular entry here. What I want to do is remove that application. Now it goes.

If I go back here I can see that the remaining quantity of this first one right here is 50, and the remaining quantity of the shipment is minus 50. So they're open.

What I want to do is go ahead and apply. So I can go ahead and view the unapplied entries, which are these two, and let me just see if I can do it like this.

That's those are that are available to apply, which is, and I want to actually put it to the second one, that is my goal.

Let's see if that worked. Yeah, now it's closed out and now the remaining amount is on the first one. Technically, if I close this out, I just go ahead and hit reapply and everything just goes through. 

Now I should be able to go into my item ledger entry, use this one when you just refresh.

So I get the latest version. I can see that this sale for 50 is now $550. This is a FIFO item.

We got first in for 1000, then we got second in for 1100. Then we shipped out and the first shipment going out was 50. It should have gone out of this one at 500, but I reapplied it using the application worksheet. And I applied it to the second one, which now with the cost, is 550.

I have a remaining balance out of the first one, which is 50. So I can overwrite the application method, which is insane, but cool.

If I click in here I probably get like a bunch of entries. Yep. So in the beginning it booked it on average and fixed itself like we talked about before, then I reapplied it to the first one. 

So there was another adjustment to fix it down to 500 (and this is really cool) because this shows you sort of the history of the applications of that item. 

But I don't recommend going into craziness with items like this. This gets a little bit hairy when you when you work with it too much.

But if you have a critical thing that happens, like you post something at a really wrong cost, and you have to reverse it, you're going to reopen and do things like that, then it's helpful.

So I hope this was instructional and till next time.