Weighted average cost calculation

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I had question about the weighted average cost calculation. How AX calculate the weighted average of an item? How is the closing for weighted average cost item? Is the transfer transaction included for the calculation?

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RamK 2,580 on at

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Refer technet.microsoft.com/.../gg242469.aspx which provides detail explanation about weighted average calculation

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Guy Terry 28,924 Moderator on at

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[quote user="pshan112"]

How AX calculate the weighted average of an item?

[/quote]

The current running average cost price is calculated using the same method as all of the actual costing methods (except Moving average):

The value of inventory at the beginning of the period, plus the value of relevant receipts since the beginning of the period less the value of relevant issues since the beginning of the period is divided by the quantity.

[quote user="pshan112"]

How is the closing for weighted average cost item?

[/quote]

Inventory close creates a 'virtual' issue transaction for all the inventory you had at the start of the period, and all of the inventory you received during the period. It settles all these receipts to this virtual transaction. In this way, the virtual transaction has a cost that is the 'average'. It also creates a virtual receipt transaction for the same quantity with the same cost, and settles all issues in the period to that. In this way, all issues in the period have the same cost, which is the average.

[quote user="pshan112"]

Is the transfer transaction included for the calculation?

[/quote]

Transfers are included if they are between inventory dimensions which are 'financially' tracked (per the setting on the Storage and Tracking dimension group forms).

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Community Member on at

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For example, my item is financially tracked for site and warehouse. Transfer journal to transfer the item from location A to location B, this transaction should not have any cost incurred, is this correct?

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Guy Terry 28,924 Moderator on at

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The transactions themselves will have a cost at the time they are made, since this is just what AX does; the cost on the issue (from location A) and the receipt (to location B) will be the same.

The behaviour of inventory close on these 'non-financial transfers' depends on the version of AX 2012 that you are using. Do you know which? RTM/FP, R2, R3?

The reason the version is relevant is that there was a parameter in the Inventory module called 'Activate closing of non-financial transfers'. But in latest versions of AX 2012, this parameter has disappeared.

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Ludwig Reinhard Microsoft Employee on at

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Hello Guy Terry, recently I just noticed what you mentioned that the parameter is gone. Yet it seems that MS made a change in the inventory closing and adjustment form. They called it preclose if I am not wrong and this process is supposed to do the same. Unfortunately, I have not found the time to test it in detail. Hope this comment adds something useful to this discussion. Best regards, Ludwig

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Guy Terry 28,924 Moderator on at

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Hi Ludwig,

It helps me. I tested the Closing process in R3 whilst writing my last comment - and saw that a non-financial transfer was not closed. I could not understand why. It's because I forgot about Pre-closing. Thanks!

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