Dynamics 365 Business Central: Item Costing, part 9

Dynamics 365 Business Central: Item Costing, part 9

Hi everyone, we're going to keep going on costing today.

We're going to talk about the average coffee mug, and basically what we're going to do is purchase 100, just like before, of $10.Then another 100 of $11, and see, when we sell 50, where does it take it from? If it was a FIFO it would have taken it from the 10, but since its average, it's going to average the 10 and 11.

We have here 1000 and 1100. That's 2100 divided by 200, which is 10.5. I could have just averaged this. It would be $10.5, that it's being sold out at.

Basically, the question is, does it average what's remaining? Let's say, for example, this is a hundred, a hundred, and I sell 50. Now this is no longer 100, it's 50.

We have 50 plus 100. 50 times 10. It's 500 plus a 100, times 11, 1100. So that would be 1600 divided by 150. It is a different number now.

Is that the next one that takes or not? Answer is not. It always averages the inbound transactions. Actually, I'm going to  just go through that in a couple of videos.

So let's first take a look at the standard stuff

Let's take a look at this in the items. I've created the average coffee mug. It's very average! If I go into the history of this particular item, we see more options, history, entries, by directories. 

I have received two transactions.

One for 1,000. We bought 100 for a total of 1,000 and then we bought 100 for 1,100. So since this is set up as an average, if I go into costing here, this is a costing method average. When I sell this product, let's say if I go back here, just to make that very clear, If I sell 50.

This transaction here came in first 1,000. So I sell 50, it should take it out of the first transaction. However, it's not going to take it out of 1,000. It's going to take the $10.5 price which is of 550. This is because we're 525 actually.

So let's see how that works. Technically, it's not going to be $10. It gets taken out, but more.

If we go into the sales order and go ahead and create a new one to the Adatum Corporation, the average coffee mug here, any location.

Now we want to do 50, and you see cost comes in to $10.50, but we know that it always brings in the average cost, no matter of the costing method.

We're going to sell it for $20, and go ahead and post, and ship & invoice. Now it's been moved, don't want to view that. Close that out. Close out again.

Now if I go into the average coffee mug, and go into navigate, history, entires, ledger entries, I can see that the cost was $525 which is the average of the 1000 and 1100, divided out by 200. And I multiply it by 50. It's different than FIFO, FIFO would have given us 500 in here. It's averaging out what we have, basically, left remaining.