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Enquiry on unit cost ( Average costing method)

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Posted on by cucnguyen

In NAV, we use average costing method. had was for invoices posted during the same period, why would sometimes the unit cost be 8 dollars when all other lines are already at 11 dollars?

I clarify this would mean that for example:

ITEM1 cost is $8/kg at 4^th May so when I posted it was $8/kg.

Say we have purchased a new batch at $9/kg and the cost has increased to $10/kg.

On 6^th May, we backdated an invoice with 4^th May posting date, so it would reflect the $10/kg for this new invoice?

Can anyone give me advance. Thanks

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Dynamics 365 Business Central

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Mohammed Abin 15 on at

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RE: Enquiry on unit cost ( Average costing method)

How can I resolve the issue with the average costing method in Dynamics 365 where my ledger is showing a negative value for an item with zero quantity in one location, but the same item with zero quantity is showing a positive value in another location? I have different unit costs for the item in different locations and use the average costing method in Item card as well in Inventory Setup.
cucnguyen on at

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RE: Enquiry on unit cost ( Average costing method)

I checked Inventory setup. It sets automatically cost posting. Automatic cost adjustment is Day. Average Cost Calc type is Item. Average cost period is Month.

I checked the item card of that item, but cost is adjusted is not ticked. I don't know why inventory setup has set automatic cost and Automatic cost adjustment is Day but cost is adjusted is not ticked on item card
cucnguyen on at

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RE: Enquiry on unit cost ( Average costing method)

Yes. Thank you
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YUN ZHU 81,489 Super User 2025 Season 1 on at

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RE: Enquiry on unit cost ( Average costing method)

Hi, Is it not set to automatically adjust the cost?

Or manually perform Adjust Cost - Item Entries to try?

Hope this helps.

Thanks.

ZHU
Jun Wang 7,689 Super User 2025 Season 1 on at

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RE: Enquiry on unit cost ( Average costing method)

first you need to check the set up of average cost period on inventory set up page. this is very important because it determines the valuation date used by the costing method.

you can search for how average costing works in NAV online, I won't cover the basics

then check the item card of that item to ensure the cost has been adjusted and posted. If the auto adjust and auto post are no on inventory setup, you need to manually run those batch jobs.

open the page by click the 3 dots and you will see a detailed calculation of the item.

sometimes backdate invoice item with average costing may get weird number which is caused by NAV doesn't want to have negative inventory value. This is a rather complex topic, but if you run the adjust cost and post to gl job, the number should be correct.
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TabrezAjaz 190 on at

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RE: Enquiry on unit cost ( Average costing method)

Hi Valenia,

It's possible that the reason you are seeing a unit cost of $8 for some invoices posted during the same period is due to the way that the average costing method works in NAV/Business Central.

When you use the average costing method, the system calculates the average cost of all items in stock, based on the total cost of all units in stock and the total number of units in stock. This average cost is then used to value all inventory transactions.

In your example, if you had some units in stock with a cost of $8/kg and then purchased a new batch at a cost of $9/kg, the average cost of all units in stock would be recalculated to $8.50/kg ((($8/kg x number of units at $8/kg) + ($9/kg x number of units at $9/kg)) / total number of units).

If you then posted an invoice with a posting date of 4th May, the system would use the average cost of $8.50/kg to value the inventory transactions on that invoice. However, if the invoice had been posted at the time when the cost of the item was still $8/kg, the system would have used that cost to value the inventory transactions on the invoice.

In other words, the unit cost on an invoice posted during the same period may not always reflect the current average cost of the item if the cost of the item changed during that period. This is because the average cost is calculated based on the total cost of all units in stock, and not just the cost of units received during a specific period.

To avoid this issue, you may want to consider using the FIFO (First-In-First-Out) costing method instead of average costing, which would ensure that inventory transactions are valued based on the actual cost of the items at the time of the transaction.
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Inge M. Bruvik 1,021 Moderator on at

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RE: Enquiry on unit cost ( Average costing method)

The system will use the average cost at the time of posting. Changing the posting date should not effect the average cost.

The average cost is calculated from your current stock at the time of posting.