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Item inventory cost is calculated using the average method, even though LIFO is selected.

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Posted on by SK-26120157-0

I Created an Item for LIFO Cost Method verification in Microsoft Business Central

Application Version: 26.1

Created a Test Item, and assigned LIFO is a cost method

Created 2 POs in 2 different dates and posted Receipt & Invoices.

Latere created a SO in another date and posted Delivery & Invoice.

When checking item ledger for inventory cost based on the LIFO cost method.

Expected as follow but Actual is showing based average calculation method. Please refer the following.

Expected Closing inventory value for the specified item as follows;

Last in First Out

Date	Doc	UOM	QTY	Price	Amount
30-05-2025	PO1	Pcs	10	100	1000	Purchase
02-06-2025	PO2	Pcs	10	200	2000	Purchase
04-06-2025	SO1	Pcs	-7	300	-2100	Sales

	PO1		10	100	1000
	PO2		3	200	600
	Expected Closing Inventory				1600

The Actual Cost postings is happen on average cost method even though item has been assigned LIFO cost method. Please refer the below in the business central system.

Please guide how to recalculate or adjust the cost for the selected LIFO cost method items

Categories:

Dynamics 365 Business Central

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YUN ZHU 85,670 Super User 2025 Season 1 on at

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Item inventory cost is calculated using the average method, even though LIFO is selected.

This is a bit odd, as other experts have mentioned, have you implemented Adjust Cost - Item Entries?

Or you can try the new feature below.

Business Central 2024 wave 1 (BC24): Inventory Cost Adjustment tool (new Inventory Cost Adjustment page)

https://yzhums.com/50383/

Thanks.

ZHU
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RockwithNav 7,187 on at

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Item inventory cost is calculated using the average method, even though LIFO is selected.

No idea what's your Inventory setup looks like but try executing Adjust cost Item entry batch job to be on safer side before getting deviated elsewhere.
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Sohail Ahmed 4,747 on at

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Item inventory cost is calculated using the average method, even though LIFO is selected.

Even if LIFO is selected on the item card, Business Central does not automatically post entries based on LIFO unless the Adjust Cost - Item Entries batch job has been run.

Business Central temporarily uses average cost until the cost adjustment is done. Once you run the “Adjust Cost - Item Entries” and post inventory cost to G/L, the system will recalculate and apply LIFO costing properly, updating the cost entries and G/L accordingly.

✅ What you should do:

1. Go to: Inventory → Periodic Activities → Adjust Cost - Item Entries

2. Run the process (you can apply filters if needed)

3. Then go to Post Inventory Cost to G/L to reflect it in accounting.

This should update your item ledger and value entries to reflect LIFO, not average cost.

Let me know if you need help checking if cost adjustment is automatic in your setup.

✅ Mark this answer as verified if it helps
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Jainam M. Kothari 9,695 on at

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Item inventory cost is calculated using the average method, even though LIFO is selected.

If an item in Business Central 26.1 is set to use the LIFO cost method but is showing average cost behavior, it's likely due to the system not yet applying the correct costing layers. This can happen if the "Adjust Cost - Item Entries" batch job hasn't been run, which is necessary to apply LIFO costing after transactions are posted. To fix this, ensure the item is correctly set to LIFO, run the cost adjustment job, and verify that the inventory setup allows automatic cost adjustments. If incorrect costs were posted, you may need to use the Revaluation Journal to correct them.