should i use Avearage costing method ?

Hi Folks,’

My client Has Manufacturing Process.

we have to Implement Nav 2009.

when it comes Costing methods for Consumable materials he is using Average.(out side)

that he wants same costingmethod In Navision for consumbles.

i know how the costing method works in Navision

but i gone through the link but there that Link says DONT USE AVERAGE COSTING METHOD.

So experts please let me know about your solutions on this.

Can i continue to use Average or Not ?

The link you posted is actually somebody changed from another costing method to Average. MS suggest to create a new item. Average costing method works, but creates a lot of overhead in manufacturing. Since the cost has o role up everytime the average cost is changed at the component level.

Experts, share your experience…

Hi Rahsed,

What do u mean by the cost has 0 role up every time the average cost is changed at the component level. Could you please explain in detail. I am asking this because we have been suggested by our consultant to use average instead of FIFO , it would be good if you can share all pros and cons so that i can discuss with them. We don’t want that after complete install we face some mess.

Thanks in Advance.

the cost has to role up every time the average cost is changed at the component.

So lets say You are building computers.
If a component, lets say RAM price fluctuates a lot, all the Computers cost will fluctuate a lot as well. The fluctuation will depend on average cost type, Daily, Monthly based on setup In Inventory. I’m assuming you are using 5.x
This creates many entries in value entry and slows down adjust cost. 5 Sp1 has improved the performance and 2009 has improved performance even further but it will run slower.
There are also issues with going negative qty or making mistakes on an entry that can screw up your avg costing.

Thanks Rashed,

I dont want to use the Average costing method for Rawmaterials ( components).

I want to use the Average costing method for Consumables , Electrical , engineering materials…

so should i continue to use the Avearge costing method fot these materials which are not used in Production orders.

Please share your valuable experience.

The largest drawbacks of average costing is the scenario where an item quantity on hand becomes negative. This causes difficult average costing calculations. If an item has a remaining quatity less than 1 and mutiple cost layers close the entry the average cost is based upon the entry that closes the ledger and not the individual layers.