How does Nav choose which item ledger entry to apply to when post shipment/invoice?

Business Central/NAV User Forum
1

Hello! All Nav Specialists:

I’m using costing method FIFO and lot tracking. I buy a item 2 times with different costs, like 20 items for $1 each and other 20 for $2 each. There are 4 entries in item ledger with 4 different lot numbers, 1111 and 2222 with $1 unit cost, 3333 and 4444 with $2 unit cost. Each lot has 10 items. The I create SO and sale 20 of them. If I don’t use “Apply-to item entry” column to specify which item ledger entries to apply to, the “Unit Cost” shows average cost. After I post ship, Nav applies item ledger entries of 10 for $1 each(lot number 1111) and 10 for $2 each (lot number 3333). My questions are:

  1. Why does Nav show average cost when I use FIFO as costing method?

  2. Why does Nav choose lot number 1111 and 3333 to ship? How on the earth does Nav choose which item ledger entry to ship without manually specifying the entries?

  3. If I use “Appl-to Item Entry” column in sales line to specify the which entries to ship, I have to create 2 sales lines with 10 items each and apply them to the item entries I want, right?

2

Someone will come along and explain this better than I will, but I’ll at least give number one a shot (developer here, not costing / financial expert).

  1. Why does NAV show average cost when I use FIFO as costing method?

NAV just needs some cost to display. Rather than calculate the cost up front, which could take a lot of time, it uses the average cost. The true cost will be reflected one the Adjust Cost batch job is run. Adjust Cost does a lot of things that I’ve never delved into and there are a ton of rules as to how it chooses what costs to use.

Also, remember that just because something is next in line to be sold when you create the order doesn’t mean it will actually be what is sold. Imagine you have created a sales order, and before it ships and invoices, you receive a back-dated purchase order. Now NAV didn’t know about these new items when you created the sale and the cost isn’t going to automatically update on that sales order. NAV should ship these newly received items because to the system they were received before everything else. Then when Adjust Cost is run it will pick up the cost of these items and update everything.

Anyway, I hope that helps a little.