Hi. I have a customer who has problems with understanding why you need it and exactly “adjust cost - item entries” works. Could someone explain this in easy words, perhaps an example? Another thing. The customer has purchased and sold an item. He has never purchased this item with a higher cost than 5,50. Sometimes the price was 5,30. After the last “adjust cost” his average cost is 5,52 and his unit cost is 5,52, which is higher than he as ever purchased the item for. If I look at the report “Inventory Valuation” and look at the fields value (3722,34) and quantity (668) I get an avarage cost of 5,57!!! Again this is higher than the highest purchase. Can some cost guru answear this? The client uses 3.70 Please help, I am at a total loss here… Regards, Thomas Jensen Norway
Average Costing Overview The following journal transactions are posted exactly as shown for a given average-cost item (with no prior history). What is the on-hand quantity and value as of 1/31/2004? Posting Date Entry Type Doc No. Item No. Description Location Code Qty UOM Unit Amount Amount Unit Cost 1/1/2004 Purchase T00001 TEST Test Item BLUE 10 PCS 100.00 1000.00 150.00 1/5/2004 Negative Adjmt. T00002 TEST Test Item BLUE 5 PCS 100.00 500.00 150.00 1/2/2004 Positive Adjmt. T00003 TEST Test Item BLUE 10 PCS 100.00 1000.00 150.00 1/3/2004 Negative Adjmt. T00004 TEST Test Item BLUE 5 PCS 100.00 500.00 150.00 1/4/2004 Positive Adjmt. T00005 TEST Test Item BLUE 10 PCS 100.00 1000.00 200.00 Simplified Posting Overview Posting Date Entry Type Doc No. Item No. Description Location Code Qty UOM Unit Cost Posted Extended Amount 1/1/2004 Purchase T00001 TEST Test Item BLUE 10 PCS 100.00 1000.00 1/2/2004 Positive Adjmt. T00003 TEST Test Item BLUE 10 PCS 150.00 1500.00 1/3/2004 Negative Adjmt. T00004 TEST Test Item BLUE 5 PCS 125.00 625.00 1/4/2004 Positive Adjmt. T00005 TEST Test Item BLUE 10 PCS 200.00 2000.00 1/5/2004 Negative Adjmt. T00002 TEST Test Item BLUE 5 PCS 155.00 775.00 Valuation-by-Day Date On Hand Quantity Unit Cost On Hand Value 1/1/2004 10.00 100.00 1000.00 1/2/2004 20.00 125.00 2500.00 1/3/2004 15.00 125.00 1875.00 1/4/2004 25.00 155.00 3875.00 1/5/2004 20.00 155.00 3100.00 Notes: 1. Purchases in item journals use the Unit Amount field to obtain cost to post to the G/L. 2. Positive Adjustments use the Unit Cost field to obtain cost to post to the G/L. 3. Negative Adjustments obtain their “true’ cost from the adjust cost / post cost routines. The value in the journal is meaningless for these entries. 4. The order of posting and timing of adjust cost / post cost is irrelevant for these entries. Conclusion: The negative adjustment on 1/3 was valued at $125.00 each. Only the remaining quantity on hand (15 @ $125.00 each) are left for average cost calculations after 1/3. The additional 10 @ $200.00 each are added to the “bucket” resulting in an average cost of $155.00 (25 @ $155.00 = $3875.00). This average cost will be used until another positive adjustment changes it. Navision Average Cost Posting Examples in Test Databases General Logic (01/04) 1. Post Item Journal Batch Entry-A 2. Post Item Journal Batch Entry-B 3. Run Adjust Cost / Post Cost Activities 4. Review Item Ledger / Value Entries 5. Post Item Journal Batch Entry-C 6. Run Adjust Cost / Post Cost Activities 7. Review Item Ledger / Value Entries 8. Post Item Journal Batch Entry-D 9. Run Adjust Cost / Post Cost Activities 10. Review Item Ledger / Value Entries 11. Post Item Journal Batch Entry-E 12. Run Adjust Cost / Post Cost Activities 13. Review Inventory Valuation Report Inventory BOM / Finished Good Applied (01/05) 1. Post Item Journal Batch Entry-0-A 2. Post BOM Journal Batch 001-FG 3. Post 1st Sales Order (Ship/Invoice) in System 4. Run Adjust Cost / Post Cost Activities 5. Review Inventory Valuation Report 6. Post Item Journal Batch Entry-0-B 7. Run Adjust Cost / Post Cost Activities 8. Review Inventory Valuation Report Negative Inventory BOM (02/05) 1. Post Item Journal Batch Entry-1-A 2. Run Adjust Cost / Post Cost Activities 3. Review Inventory Valuation Report 4. Post BOM Journal Batch 101-FG 5. Run Adjust Cost / Post Cost Activities 6. Review Inventory Valuation Report Reciprocal Inventory BOM’s (03/05) 1. Post Item Journal Batch Entry-2-A 2. Post BOM Journal Batch 201-FG-A 3. Run Adjust Cost / Post Cost Activities 4. Review Inventory Valuation Report 5. Post BOM Journal Batch 201-FG-B 6. Run Adjust Cost / Post Cost Activities 7. Review Inventory Valuation Report 8. Post Item Journal Batch Entry-2-B 9. Run Adjust Cost / Post Cost Activities 10. Review Inventory Valuation Report Hope this will help. Naveen Jain
Most important thing to note here is 1. Purchases in item journals use the Unit Amount field to obtain cost to post to the G/L. 2. Positive Adjustments use the Unit Cost field to obtain cost to post to the G/L. 3. Negative Adjustments obtain their “true’ cost from the adjust cost / post cost routines. The value in the journal is meaningless for these entries. 4. The order of posting and timing of adjust cost / post cost is irrelevant for these entries. Hope this help to understand the average cost. I have a report developed, which will explain better, but I can not attach here and as text will be a monster text. 
Naveen Jain
Thanks for your answear Jain, but I still dont understand how my average cost can get so high? And what about the figures in the inventory valuation report? What does this report of yours do? Could I take a look at it? Anymore insight would be most appreciated. Regards, Thomas, Norway.
Sure, I can not attach here, so give me your e-mail ID, I will sent it to you. Naveen Jain
Jesen: Meanwhile you can check your Item Ledger Entries. It is posible that their are few Item Ledger Entries with Zero quantity and Amount or vice versa. 3.70A has a bug that it will consider even those entries. Also You can try this workaround: Run the table 5804 “Average Cost Adjustment” from the Object Designer and enter the Item No. with variant (If Any), Location (if any) and Valuation date (probably workdate) and run the process “Adjust Cost - Item Entries” again. Hope this will help to resolve your Average cost issue. Naveen Jain
Hi Jensen, Are you using Inventory BOMs ? We have a similar problem with one of our client that the inventory grows. In the case of a negative BOM Journal, should zero out itself meaning the finished good should be removed from inventory at the same cost the components are put in. But that is not the what actually happens. The finished good is removed from the inventory at its average cost made from components but the Component Items are put in the inventory at their last direct cost messing up all the inventory badly. It just grows… Also check you ILEs and VEs, there is a lot hidden in them. Average cost at a particular time is calculated based on Valuation dates : Say for example “Adjust Cost - Item Entries” is considering Entry A for adjustment. It will considering all the value entries for that item valuated before the valuation date of entry A to figure out the average cost no matter if the posting date on those entries is prior to or later than posting date of entry A. S Jain