# FIFO costing

Dear costing guru’s

I have some examples I am trying to create in AX V4 for FIFO costing to understand how AX gets to the cost price figure but it doesn’t make any sense to me. For example, I have create an item from scratch, with FIFO and standard dimension group (which has WH only active, with physical and financial inventory turned ON).

• I create a PO for 10 @ 20.00 and invoice update this. on 3/9/08
• I create another PO for 10 @ 30.00 and invoice update this on 5/9/08
• I create a sales order for 1 @ 40.00 and invoice update this on 8/9/08

When I go to the inventory on hand screen it shows me a cost price of \$25.00 and a financial cost of \$475.00 because it is reducing it by the avg cost price of \$25.00. This is the average cost but since we are using FIFO costing shouldnt this be taking the first value in inventory which is \$20.00?

I dont have to run an inventory close to see the adjustment back to \$20.00 do I? I thought AX was able to illustrate the cost price without running a close?

Can someone please help me understand what is going on here.

The Cost Price on On-hand screen is the estimated actual cost price, which is average = Financial Cost Amount / Posted Quantity. The Financial Cost amount is your financial amount which have been posted.

If you check the inventory transaction of the sales order, it shows 1*25 = \$ 25 as the COGS.

You can run “Recalculation” to adjust the cost price of your sales order.

Check your on-hand screen, the Financial cost amount now is 480. And the estimated cost price is now 480/19 = 25.26.

I think this is normal with companies which are running actual cost. You can only get the actual settlements when you run inventory close each month end.

Hope this help

HI Khue,

Thank you for your reply. It makes sense to me but still doesnt explain how I get the actual or accurate cost price if I am using a particular costing method such as FIFO. Why does the inventory transaction of the slaes order show \$25.00 as the COGS? Is this because it is taking the average cost price of the item from the inventory - on hand screen which shows the cost price as \$25.00?

I ran a recalculation as of 8/9/08 and seems like nothing has changed. My cost price of my sales order is still at \$25.00 and my financial cost amount from my on hand screen is at \$475 as it was before. Estimated cost price is still at \$25.00.

Any ideas why nothing changed?

So if I were using this costing method does that mean I need to run a recalc to get the correct/accurate cost price for an item? surely AX should illustrate this cost price somehow without having to run a close or recalc everytime?

Isnt there another form which can show me the true value of the item after a particular costing method is used?

THanks for your help

Regards

Sahar Saqeb

Hi Sahar,

As far as I know, this is how AX works. Actual cost is only correct when you close the stock and recalculate, that’s why I mentioned it as ESTIMATED COST PRICE . And… I think you can only get the correct cost price and cost of inventory transaction at month end when you use actual costing method.

Thanks…