FIFO costing method but COGS will apply specific when selling lot tracked items

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Posted on by BryLearnsBC

Hi Community.

I just need to verify how the FIFO costing method works in BC.

I have my items setup as FIFO and is lot tracked.

With typical FIFO the cost of your items sold will always be the cost of the first batch purchased even if you sold the 2nd batch first.

Ex.

batch 1 = Lot 1 purchased 100 units @50/unit = 5000 total value

Batch 2 = Lot 2 purchased 200 units @ 40/unit = 8000 total value

When I sell 150 units

100 units of lot 2 + 50 units of lot 1 = total

System should cost you

100 units @50/unit +50 units @ 40 = total

5000 + 2000 = 7000

This is how typical FIFO will work

But in BC if it is lot tracked and even if you are using FIFO it will "change" the costing method to Specific Costing after you apply cost adjustments.

Soo BC scenario will be

100 units@40 + 50 units@50 = total

4000 + 2500 = 6500

I can't find documentation on lots and costing method but I did test and this is what I saw the system doing in the Value Entries.

If anyone can chime in and verify if this is how their system acts to please do mention it.

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Ben Baxter 4,979 Super User 2024 Season 2 on at

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FIFO costing method but COGS will apply specific when selling lot tracked items

Just a point of clarification, this is due to the "Lot Specific Tracking" being enabled within your Item Tracking Code. If this was disabled it would apply the normal FIFO costing.

The reason you NEED "Lot Specific Tracking" turned on is the system tracks the quantity per Lot. In your example, using FIFO (non-Lot Specific) the system would consume 100 of Lot 1, even though you actually only consumed 50. Just as it would have only consumed 50 of Lot 2, even though you consumed 100. So if I go and do a count of my inventory, I won't have the correct quantity of either Lot in my inventory.

The "Lot Specific Tracking" corrects for this and applies the correct consumption entries to the appropriate Lot Quantities, which the costing follows. So "Lot Specific Tracking" really converts the FIFO costing into "Specific" costing.

Hope this helps shed light on why this is happening, and give you peace of mind that it is a good thing for Lot Tracked inventory.

Best Regards,

Ben Baxter

Accent Software Inc
gdrenteria 12,475 Most Valuable Professional on at

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FIFO costing method but COGS will apply specific when selling lot tracked items

Hi

I hope this information can help you.

FIFO Costing Method in Dynamics 365 Business Central Wave 2 (youtube.com)

Concept of Costing Method: Specific (d365akash.com)

Business Central Specific Cost | Roberto Stefanetti Business Central Blog (robertostefanettinavblog.com)

Best

GR
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YUN ZHU 74,141 Super User 2024 Season 2 on at

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FIFO costing method but COGS will apply specific when selling lot tracked items

Hi, I hope the following video can also give you some help

Costing Part 17, Lot Specific Costing

https://www.inecta.com/dynamics-365-business-central-item-costing-part-17

Thanks.

ZHU
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Jun Wang 7,448 Super User 2024 Season 2 on at

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FIFO costing method but COGS will apply specific when selling lot tracked items

this is the normal behavior. When selling lot tracking items, user needs to specify which lot the user needs to sell. By doing so, it, in effect, specifies the costing of the items lot being sold.

for your reference

https://learn.microsoft.com/en-ca/dynamics365/business-central/design-details-costing-methods