Value Added Item Charge After Posting Purchase Invoice

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Posted on by mariafenny

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Hi,

I would like to ask about item charge that give added value to item cost. I create the item charge after I post the Purchase Invoice, because my vendor give the freight fee in the next month after they give the invoice. I used Invoice Journal (Account Payable - Inquiries - Invoice Journal - Charge - Adjustment) to input my charge.

When I look at Inventory Transaction, my cost amount for that item is still the same as my purchase order amount. The item charge that I added later didn't sum up to cost item.

I already set my item charge code with Item for Posting Debet , and Ledger Account for Posting Credit. I try to run Recalculation function and Closing Inventory (Inventory Management - Periodic - Closing and Adjustment - Recalculation), but the cost amount is not change. there is nothing too at Adjustment field at Inventory Transaction.

Do my steps to create Item Charge after posting item charge correct? Do I miss something? I want my freight fee is included in the cost for that item.

Thanks in advance.

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texasp8 on at

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RE: Value Added Item Charge After Posting Purchase Invoice

Hi Maria,

The setup of your charge code sounds correct. I have a Contoso demo system in front of me. There is a Charge code called 'MISC ITEM' which has the setup you describe (Debit = Item, Credit = Ledger account).

I create and invoice a purchase order. The inventory transaction shows the PO price as the (Financial) Cost amount, and Adjustment is blank.

I go to the posted invoice journal (header) and click Charges -> Adjustment. I leave the default values (Net amount, All lines) and enter the MISC ITEM charges code and a fixed charge. I hit OK, and then head back to the PO Line. The inventory transaction now shows an 'Adjustment', which reflects the portion of the charge which was assigned to the PO line I selected.

I expect that the Inventory transaction related to the PO will be updated with the Charge immediately. I do not know why you are not seeing this. If the inventory transaction is already settled to one or more issues, Inventory close will update the cost of those issues the next time it runs.

Is your item Standard Costed (or perhaps costed using Moving average)?

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mariafenny 175 on at

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RE: Value Added Item Charge After Posting Purchase Invoice

I use Moving Average for costing. Is it has some effect to the Charge Item?

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Guy Terry 28,882 Moderator on at

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RE: Value Added Item Charge After Posting Purchase Invoice

Hi Maria,

Yes, I expect Moving average is the reason. Moving average has several features which are not really compatible with what you are trying to achieve.

For example, if the PO price is different from the PO Invoice price, the PO Invoice price is only reflected in the item cost if the item is still on hand. If you've already sold it, the difference is expensed, and the cost of the sale is not updated.

Issues (e.g. sales) can never be revalued, because they are ignored by the inventory close process. There would be no way to reflect the updated cost on any sales that were made before the Charge was posted.

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mariafenny 175 on at

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RE: Value Added Item Charge After Posting Purchase Invoice

Hi Guy,

do you happen to have any link (or anything else) that give an explanation about why does an item charge is not compatible with Moving Average and Standard Cost Costing Method?

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jgracak on at

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RE: Value Added Item Charge After Posting Purchase Invoice

Hi,

You may notice that you also can not do any standard adjustment in the Inventory closing form for items that are Moving average. That is because Moving average is an inventory method that cannot be closed with an inventory closing procedure.

Here's the whitepaper for the moving average method: www.microsoft.com/.../details.aspx

Kind regards,

Josip

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Guy Terry 28,882 Moderator on at

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RE: Value Added Item Charge After Posting Purchase Invoice

Hi Maria,

The Whitepaper that Josip mentions is a good source of information on Moving average, although it doesn't mention about charges being applied to a PO Invoice. This statement within the document is pretty clear though:

"Costs on inventory issues do not change even if the purchase costs change".

But the second answer to question 4 here covers your scenario:

blogs.msdn.com/.../answers-to-common-questions-about-moving-average-costing-in-microsoft-dynamics-ax-2012.aspx

I confirmed this with a quick test. If a Purchase Invoice is posted with a different price to the Purchase order, and the Inventory is still on hand, Moving average will allow the on hand inventory to be revalued (that is, inventory that has not already been sold). I added an item charge to a PO Invoice after the invoice was posted to find if it also resulted in the revaluation of on hand inventory and I find that it doesn't. The full value of the charge is posted as a 'Price difference for moving average'.

The answer on that blog post seems to say that if you add the Item charge at the time you post the PO Invoice, the value of any inventory will include the charge. I think this is no use for you for two reasons:

You want to post the charge with the PO Invoice, since you don't know it at this time.

You may well have sold all the inventory by the time you post the PO Invoice.

There is one other solution that might be worth investigating. A hotfix released after R3 CU8 allows you to include an item charge in the product valuation when you post the product receipt.

blogs.msdn.com/.../post-misc-charges-at-time-of-product-receipt.aspx

Perhaps you will be able to use it to include at least some estimate of the freight fee in the product cost. (I haven't ever installed this hotfix myself).

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mariafenny 175 on at

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RE: Value Added Item Charge After Posting Purchase Invoice

Hi All,

I quote a line in the blog that Guy mention above : "In case the Misc. charge is posted after the Invoice it will be expensed to the price difference account" (point 4).

I still don't understand why does AX made Moving Average costing like that. It seems like I can't see my actual cost if I have a scenario like this.

Including some estimate freight fee is a good workaround, but it is an estimated cost, not my actual one.

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Guy Terry 28,882 Moderator on at

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RE: Value Added Item Charge After Posting Purchase Invoice

Hi Maria,

I've never read anything to explain why Moving average behaves the way it does. It was introduced in to AX 2012 with the Feature Pack release, along side Retail functionality. It is often described as being suitable for retail scenarios. I guess the advantages of Moving average are that the costs on your sales will never change, and that Inventory close has nothing to do. Why this makes it particularly suitable for retail organisations is not clear to me.

It behaves as described, and you can use it, or not. If you want actual costing, there are four other inventory models in AX you could also use which will update actual costs as you want.

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Community Member on at

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RE: Value Added Item Charge After Posting Purchase Invoice

Hi,

I updated third-party charges through purchase order posted invoice journal (header) and click Charges -> Adjustment. Purchase invoice journal was posted and the material was consumed by production in the month of April. Now I did inventory recalculation and inventory closing for the month of April.

Would like to know the allocated charges will add to item cost as well as on consumed items?

Thanks in advance.

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Guy Terry 28,882 Moderator on at

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RE: Value Added Item Charge After Posting Purchase Invoice

Hi Titus.

If your inventory model is 'Moving average' (as per the previous messages in this thread), then No, the cost of consumed items will not change. Only FIFO, LIFO, Weighted average and Weighted average date support this.

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