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Costing Method (FIFO and Weighted Average) in BC

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Posted on by CU07101338-0

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Hello Everyone,

I hope you're all doing well!

I have a question regarding the costing methods in Business Central, specifically for FIFO.

In FIFO, is the cost determined based on the Entry No. or the Posting Date? For example, consider a scenario where we use the Application Worksheet and documents are applied to each other:

We produce a finished good with Item Ledger Entry No. = 100, and Posting Date = January 10.
A sales transaction is recorded with Entry No. = 200, and Posting Date = January 15.

Now, suppose we post a backdated output on January 1, but its Item Ledger Entry No. is 300.

In this case, which entry will the sales cost be applied from—Entry No. 100 or Entry No. 300? In other words, which takes priority in FIFO: Posting Date or Entry No.?

Also, how does this behavior compare when using the Weighted Average costing method?

Finally, is the Unit Cost on the Item Card always calculated based on Weighted Average, or does it change depending on the selected costing method?

Thanks in advance!

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Dynamics 365 Business Central

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Jainam M. Kothari 12,116 Super User 2025 Season 2 on at

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Costing Method (FIFO and Weighted Average) in BC

Hello,

In Business Central, the FIFO (First-In, First-Out) costing method prioritizes the Posting Date over the Entry No., meaning the cost for the sales transaction will be applied from the entry with the earliest Posting Date, which in your example is Entry No. 300 (January 1).

In contrast, the Weighted Average costing method calculates the cost based on the average cost of all inventory items over a specified period, regardless of the Posting Date or Entry No.

The Unit Cost on the Item Card is not always based on the Weighted Average; it depends on the selected costing method.

For FIFO, LIFO, and Specific costing methods, the Unit Cost is calculated based on the actual costs of the items, while for the Standard costing method, it is based on a predetermined cost.

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Khushbu Rajvi. 18,966 Super User 2025 Season 2 on at

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Costing Method (FIFO and Weighted Average) in BC

Please check this: https://learn.microsoft.com/en-us/dynamics365/business-central/design-details-costing-methods

https://learn.microsoft.com/en-us/dynamics365/business-central/setup-best-practices-costing-method

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YUN ZHU 90,068 Super User 2025 Season 2 on at

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Costing Method (FIFO and Weighted Average) in BC

The dates of cost or financial data in this system are calculated based on the Posting Date. It has nothing to do with the Entry No.

Even if it is 2025, you can still adjust the costs based on, for example, five years ago.

PS: Design details: costing methods

https://learn.microsoft.com/en-us/dynamics365/business-central/design-details-costing-methods?wt.mc_id=DX-MVP-5004336

Hope this helps.

Thanks.

ZHU

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