BoM price Calculation with FIFO

Finance and Operations/AX User Forum
1

Hi, Could I have ‘Std cost’ inventory model for finished good FGI while some of the raw material can follow “FIFO”? Here is what I have set up.

for FGI - I run the BoM price calculation to generate both cost and sale price using the Std Costing version “std version 1” that contain my item price, cost category for route and indirect (in costing sheet). I set up ‘FIFO’ Inventory Model.

In BoM calculation Group, sale price model set to ‘cost group’ & cost price model set to ‘item cost price’. this calculation group is assigned to both FGI and raw materials.

For each of raw material, to start off, I entered a cost price ($50) and purchase ($40) (std cost type) defined in the item price table. I assigned a cost group of ‘direct material’ with 20% markup. However, I set ‘FIFO’ inventory model, here. In purchase cost tab, the last cost is also checked.

Route operation uses a cost category that is assigned to ‘Mfng’ direct manufacturing cost group.

In, Costing Sheet, material cost group under total material cost, Mfng under total manufacturing cost and overheads use seperate cost group of ‘indirect’ (as in the sample data). I just added the same costing version (“std version 1”) and assigned an hourly rate for the labor overhead.

when I ran the BoM calculation for FGI, system showed the cost price for material, process and overhead along with sales price of the components with marke-up and the FGI sale price. I activated this sale price for the FGI.

from what I understand, if we use the FIFO, the variance cannot be captured in detail and that majority goes by Std Cost inventory model. What are the implications in the above set up if I go with FIFO? Could I have a ‘std costing version’ for raw materials or FGI while I chose FIFO? How does the system calculate the item price in the FIFO? Do we not specify a purchase price while setting up the item in AX? Appreciate if someone could help clarify these and the implications. Our company so far has used the FIFO and doesn’t use the std costing. However, I see a good benefit in using that. please advise.

many thanks

2

What are the implications in the above set up if I go with FIFO?

Your variance to standard is harder to decipher.

Could I have a ‘std costing version’ for raw materials or FGI while I chose FIFO?

Yes but the version is driven my the costing method, so no point in putting in a RM standard cost and have it costed as FIFO.

How does the system calculate the item price in the FIFO?

Item price of raw material at financial update, rolled up by inventory close

Do we not specify a purchase price while setting up the item in AX?

Yes you can.

Appreciate if someone could help clarify these and the implications. Our company so far has used the FIFO and doesn’t use the std costing. However, I see a good benefit in using that. please advise

You lose the benefit of variance analysis on a cost base roll up in this manner as your material cost moves, but it depends what the “good benefit” you see for you is.

3

Thanks adam. if we use the FIFO for both RM and FGI, then we don’t need to create a costing version at all. correct? But then how can I factor the overhead or surcharge?

so, with FIFO, the BoM price is auto-calculated based on the BoM calculation group settings - cost model and sales price model. Correct?

cost model → purchase price

sales model → cost group

what are the benefits of going with FIFO and what should we consider while setting up FIFO in AX 2012?

Thanks

4

what are the benefits of going with FIFO and what should we consider while setting up FIFO in AX 2012?

You should really talk to your accountant about this.

I recommend you setup a simple BOM and play with the version settings.