Dynamics 365 Business Central: Item Costing, part 3

Dynamics 365 Business Central: Item Costing, part 3

Hey everyone, we're going to keep going on costing. Last time, I left it off with unraveling the 4 GL accounts that happen to get posted to, when we're posting costing.

I'm going to raise it up to 6. Let's see how that goes. We're going to add, we have the item, coffee mug spring, and we're going to add something called overhead cost.

It's going to be 10%. When we have the overhead costs, it’s going to post to, and in this case the transaction was for $1000 and 10%. We have AP like this, let's put inventory here and then we have something called overhead.

Across from AP we have purchases. Across from inventory we have direct cost applied. And then across from overhead we have nothing.

I'm not I'm going to put any offsetting to overhead.

When we post the 1000 purchase we buy for a $1000, so we owe $1000 to the vendor and offset to purchases is going to be a $1000.

Our inventory, however, since we have overhead cost of 10%, our inventory comes in at $1,100. These are actually split into two transactions, but I'm going to just post that at one. 

But the direct cost applied is only 1000, because that's our direct cost to the vendor.

We’re missing a hundred bucks, it needs to go somewhere. That hundred bucks goes into the overhead accrual account. Here you have an overhead accrual, so this is a credit amount, technically on an account that sits on the income statement, cost-wise, possibly in cost of goods sold.

When you incur this overhead, whatever that is, you post against this overhead account to make that go down to zero because this is an accrual account. It should be accruing against some overhead that you have. 

You can see how this now all makes sense. You want the 1000 to hang around and you want these to offset, and you want to be able to split these two to make up the inventory.

Now these 4 accounts are now 5 accounts, and sort of jive.

Let's see how that goes in the system 

Let's play around with the system a little bit. I'm going to go into the general posting set up and take a look at the accounts that are set up.

Here we are working with the domestic one, no tax. I set up the purchase and the direct cost. We have the overhead applied account, which is 10,703.

I'm going to use that, just like we displayed on the blackboard, to generate the 5th account, so to speak.

If I go into my item and take a look at the spring coffee mug, it's right here. I want to set up an overhead. Let's just find where that is. Set up, so right here.

I'm going to add an indirect cost of 10%.

Basically, I'm buffering up the item by 10%. If I now close this out, to go out, and create a purchase order for my item. I’ll get Fabrikam again, right here.

Let me change it to Fabrikam, there we go, and then pick up the spring coffee mug into the main location. We'll get 200.

So now this is going to be $1,000, or should be, when it posts.

Let's take a look at that. Oh, it already exists. That’s what happens when you're posting fictional things over and over again. It had to use the same random number, Actually, not so random. 

Now we posted that, and let's get into the item and take a look at the transactions, so spring coffee mug.

We get into navigate, history, entries, ledger entries.

I have 3, so now you can see that the cost amount is 1100. If I drill into that, I can see that there is an extra indirect cost for 100.

This is all on the same document number, so if I navigate on that, we can see that the GL entry is getting hit, and we have indirect cost hitting 703.

You can see that we have basically 6 postings.

You have AP getting hit here.

And then you have the direct cost of coming into inventory.

Then you have indirect costs getting added to the inventory.

The offset of the indirect cost is the 703.

Then we have the usual suspects. Where we have 701 being the purchase, offsetting the purchase account or AP.

And 702, direct costs offsetting the inventory. 

This is how you can basically open up the transactions, so to speak.