Increasing Cost -- FIFO Costing Method

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Posted on by JE-20081519-0

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Hi:

An end user has showed me how the cost of an item with the FIFO Costing Method (valuation method) has increased exponentially over time.

He's not sure how this increased cost has happened. This item is a component of an Assembly Bill of Material (BOM).

The Unit Cost in the Item Card is currently $4.179. If you click on the hyperlink for this figure, you're taken to the "Average Cost Calc. Overview" screen.

Scrolling in this screen back to September 2022 displays a Purchase at a Unit Cost of $10.05. The end user says that this purchase never happened.

Scrolling to January 17, 2023, there is a Purchase at a Unit Cost of $9.88. The Quantity is 89,985.328 for a Cost Amount (Expected) of $876,092.48!

On August 7, 2024, there was a Cost Adjustment at a Unit Cost of $4.14 and a Quantity of 54,397.024. This brings the Cost Amount (Expected) to $1,080,305.08! This inflated cost is what the end user is concerned about.

He thinks that this issue may have been caused by the item not having a correct Unit of Measure (UofM). Currently, the UofM is Square Feet. This is what displays on the Pick Instruction when the component's BOM needs to be made.

The one other component of the BOM has a UofM of Each. They think Each is what the UofM should be for this item whose inflated cost he's concerned about.

Is it possible to easily change an item's UofM? Would doing so even answer his question on this component's cost?

Thanks!

John

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Jun Wang 8,023 Super User 2025 Season 1 on at

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Increasing Cost -- FIFO Costing Method

Your suspicion is valid, but you need to trace to the transaction where the costing is calculated. Per screenshot, go to such a line and look into value entries to find the document. Then you will be able to find out if the UOM, qty, and costing amount were filled correctly.

If the base UOM is square feet, and there is alternative UOM of box which one box has 1000 square. If user create a PO of 1000 dollar for a box, but enter square feet instead, the costing will be blown up.
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YUN ZHU 85,847 Super User 2025 Season 1 on at

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Increasing Cost -- FIFO Costing Method

I think modifying the unit should have no effect on the cost. You need to use Item Revaluation Journals to adjust the cost.

More details: https://learn.microsoft.com/en-us/dynamics365/business-central/inventory-how-revalue-inventory?wt.mc_id=DX-MVP-5004336
Or just create a new item.

Hope this helps.

Thanks.

ZHU
JE-20081519-0 2,105 on at

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Increasing Cost -- FIFO Costing Method

Would changing the unit of measure answer his question on this component's cost?
Vahid Ghafarpour 11,855 Super User 2025 Season 1 on at

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Increasing Cost -- FIFO Costing Method

The base UofM is the primary unit used for inventory tracking. You can change this on the Item Card, but if there is existing inventory, you may need to adjust the inventory to zero before making the change.

https://learn.microsoft.com/en-us/dynamics365/business-central/inventory-how-setup-units-of-measure