# Costing Method

The company that we are working on has the following requirement: Sales 20 units Purchase 1 10 units @ \$10 Purchase 2 20 units @ \$20 System costing (if Specific cost is selected) 10 x \$10 + 20 x \$20 = \$500/30 = \$16.66 Total Cost = \$16.66 x 20 = \$333.33 Required by Customer 10 units from Purchase 1 and 10 units from Purchase 2 10 x \$10 + 10 x \$20 = \$100 + \$200 = \$300/20 = \$15 Total Cost should be \$15 x 20 = \$300 Elaboration of Nature of Client’s requirement They stock goods bought with reference to a P number( purchase Order Number). They have 5 warehouses. THey store their goods in tanks located in Warehouses. When they receive an order, they match the order to the product with the help of the P number. They do not follow any specific costing Method. Thus LIFO or FIFO or Average Costing method does not apply. The matching can be done depending on convenience and/or specific requirement. They could stock goods of different batches in the same tank with different Unit prices. While selling, they do not want average costing to take place. THey want the calculation to be as above. I am stuck and I need help. I have tried various methods but have not succeded. I’ll be glad if anyone can help me with a solution for this problem. I need to solution ASAP! I have to make my presentation on Monday and this is my FIRST Presentation. PLease Help!! Bhargavi

I think your figures appear to be a little contradictory. You say the calculated cost is \$16.66 when specific costing is used. I don’t think this is correct. The sum you show is an average cost not a specific cost. The only way to have specific costing is Attain is with serial number or lot number tracking. Then, when you make the sale, you can specify exactly which lot is being sold - and the COGS will be calculated accordingly. If your goods are all mixed in a tank, there is obviously no way to identify which lot is being sold so a ‘real’ specific costing model is not achievable. Although, I guess, the customer could assign lot ID’s and select them on the sale to reflect which purchase lot they want to consume, without actually caring which physical product is shipped. Now I think I’ve confused myself! In your scenario, surely an average costing method (or even standard costing) would be a more appropriate choice?

You should be able to use reservation. User will reserve goods from inventory. They will be able to reserve any goods they want. System will apply inventory based on reservation. Just remember that Sales Invoice statistic calculated based on Unit Cost from item card. System never update posted invoices with real cost. So you have to print reports from Item entries or Value entries.