Dynamics 365 Business Central: Costing Question from Audience

Dynamics 365 Business Central: Costing Questions From Audience

Hey guys where we got a question from the audience the name though on the question was some company name, so we didn't know who it was please whoever you are if you happen to say thank you to this video put your name.

The question was; we actually have three transactions, 1,2,3 and I would say 4, so there's 1B here, so the first one is a purchase of quantity one and it's $100 and then there is an item charge so I would say that's a purchase as well, Item charge quantity is obviously 1 and that's at $50 and its applied to this transaction. Then we have a purchase quantity 19 at a $150 and then we have a sale of quantity 10 at $200.

We have here, from these purchases, that the unit cost is $150 obviously, so we apply the $50 to that 1 so this becomes a $150 and then we have 19 at $150 so that basically makes it 20 at $150 then we sell 10 at $200, so the person was expecting the unit cost of this sale to be a $150. So, the unit cost here should be $150 because that's coming from here make sense. For some reason they were not getting that.

I actually ran through this example with the spring coffee mug; because we're waiting for spring here in New York City; and did this these transactions trade on that and I did get $150, I'm going to run through that in the system and the screen share, so the question is why did it not work for this person? and there are reasons, there can be reasons and I'm going to show you that in the screen share, but there are two things that I can think of: the costing method, you know, what was that? We have options in the costing method: we have FIFO, LIFO, standard, average and specific, so it could be any one of those and they all work differently. It could affect this, although in this case I think you can run this example through almost all of these except maybe specific and standard and get similar results.

The other thing could be the cost adjust, routine, that's a routine that updates the cost maybe that didn't run, maybe there was set not to run, and I'll show you where to set that arms to make sure that always posts right. Good example, very educational, maybe we'll get into costing, we could spend months in costing but anyways we'll see so let's check out the video.

Let's go over this example, and again, thanks for posting this example. We have a purchase of an item quantity 1 and the item charts is $50 so the direct cost is $150 and then we have purchased the same item at $150 19 so we have now 20 and direct cost $150, so that's the same, and then we sell 10 of those for $200 and then when I open up the item cart and click on unit cost, the average cost is showing 200 but they were expecting 150.

I went through this example right here with the spring coffee mug and if I go into the history, actually navigate into the item transactions right here, I have three transactions I have one for $150 it's actually $100 cost purchase and $50 as an item charts that I assigned; now that you've seen all my items Hertz videos you know how to do that; and then we have a purchase receipt for 19 at $150 right here, so that's just straight at $150 each, and then finally we have a shipment for 10 to $200 it's a 2000 and you can see the cost amount, actually is a $150 so it's doing it correctly,

Why could it be incorrect? a couple of reasons: first of all, the costing methods. I mean, I set it up as being average so this works for an average costing method, but we can have multiple different costing methods. This could be a segue into actually talking about those, but as I set it up as average this should run fine with that. Also, what could be an issue is; I'm going to just go ahead and take a look at the list right here; there is a column up here which is called cost is adjusted now the system automatically adjusts the cost if it's set up to do so, and if you go into inventory setup, you can see that there's a checkbox here called automatic cost posting and automatic cost adjust.

If that is not set to ON, then the system is not adjusting the cost in real time and you can actually set it to be always or every year, every day and it's better it's better to do it always if that's possible, or if it's if the cost adjustment routine is too heavy, and you're running a really fast-paced business you might want to run in manually then overnight. So, if that is not on that might be your issue and you might have to run the cost adjustment manually.

So, the cost adjustment process is this, adjust cost item entries, so if you actually run this and post to GL they will basically check off all these boxes and make sure the cost is in line and update on the costume system. Like I said, that is basically happening automatically always, if it's set up in the item card, so I think by reading through your example that might be the issue, you might not have that checked off.