Hello, item card has 2 costs: Standard & Current. Can SOP be set to select which cost to use? How is it determined? Let's say on some items sold I want to use current cost and on other items I want to use standard cost, is this possible? Thanks!
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This is a clip from the Dynamics GP Help on Valuation methods and defines the difference between the 4 very similarly named types.
If you still have questions, please feel free to post. But might I suggest you open a current help session - old threads get less looks than current ones ( just me )
Valuation methods determine how the costs of inventory items are calculated. While you can have different valuation methods for different items or companies, we recommend that you talk to your tax accountant before changing the valuation method you currently use. The following table describes the valuation methods available and explains how each is used.
Valuation method
FIFO perpetual
Items purchased first are considered sold first (First In, First Out). Detailed information about the cost of all items is maintained, and the inventory is valued at its actual cost. The current cost for items is the cost of the item the last time it was purchased.
LIFO perpetual
Items purchased last are considered sold first (Last In, First Out). Detailed information about the cost of all items is maintained, and the inventory is valued at its actual cost. The current cost for items is the cost of the item the last time it was received.
Moving average perpetual
The cost of items with the same item number is totaled and an average cost is assigned to the items. The average cost of an item is revalued throughout the period as you enter increase transactions for items. The average cost also is used as the current cost. The formula is:
(Current units x current moving average cost) + (New units x purchase price) / (Current units + new units)
FIFO periodic
Items purchased first are considered sold first (First In, First Out), and are valued at their standard cost. To update the standard cost, you can use the Inventory Year-End Closing window. At the end of the year, the standard cost can be adjusted to the current cost.
LIFO periodic
Items purchased last are considered sold first (Last In, First Out), and are valued at their standard cost. To update the standard cost, you can use the Inventory Year-End Closing window. At the end of the year, the fixed cost can be adjusted to the current cost, or the cost of the item the last time it was received.
Cost variances—which can result with any of the valuation methods—are tracked in the General Ledger using the Inventory Variance account.
Hi Mahmoud, In the 2nd & 4th paragraph you reference the valuation methods, but they seem to be nearly identical. Is it a typo or am I misreading it?
If you have no further concerns, please feel free to close the case by verifying the answer.
Your feedback is highly appreciated,
Excellent, thanks for the reply
Hello there,
That's absolutely an important question. The answer is simply, it depends on the item valuation method which controls how cost layers are recorded and handled by the system. Of course that applies not only to SOP, but also to all the distribution modules which are integration with the inventory module
When the item is set up to have a valuation method of either FIFO, LIFO perpetual, the inventory cost layers are valued with their actual cost, additionally, the system keeps track of what's called the "Current Cost", which is the cost of the last receipt recorded (receiving, adjustment in ...etc). Please be noted, that when a outbound module like the SOP records a sales transactions, it doesn't consider the current cost, the cost of goods sold is recorded according to the cost layers from which the quantities have been pulled.
I have previously published an article illustrating the tiny details related to valuation methods with practical example, you may refer to the following post Inventory Valuation Methods
On the other hand, when an item is setup to have a valuation method of either FIFO, LIFO perpetual period, the inventory cost layers are valued at their "Standard Cost". The standard cost can be revalued as part of the inventory revaluation process.
Lastly, the moving average perpetual valuation method uses the current cost field as well, with different criteria than the one related to the perpetual valuation method, the average cost is recalculated each time you post an "increasing" transaction such as a receipt, adjustment in ...etc.
All in all, the sales order processing and any other decreasing transaction consider the valuation method of the item when pulling quantities from the inventory. Depending on the valuation method and how cost layers are recorded, the COGS amount is recorded
Never hesitate to share any further inquiries,
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