Inventory adjustment cost

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Posted on by Alvaro Rodríguez Ochoa

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Hi all, we use FIFO perpetual, what would it happens if I make an inventory transaction to decrease the qty for a part number, would all the transaction be on the same cost or it would respect the different costs that it was received at?

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Frank Hamelly | MVP... 46,633 Moderator on at

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It will use the FIFO costs for the decrease adjustment. This is the case any time inventory is decremented - the system uses the valuation method to determine the total value of the transaction.
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Mahmoud Saadi 32,738 on at

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With FIFO Perpetual, when an adjustment out is posted, the unit cost will be as per cost layers were received (first cost layers will be withdrawn first). Consider the following reference for further illustration on the FIFO valuation method;

Inventory Valuation Method - FIFO
Alvaro Rodríguez Ochoa 2,395 on at

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Thanks again Mahmoud.

Best regards.
Tanner 360 on at

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Hey Mahmoud,

I was aware of how the inventory adjustments work in this regard, but I have a different issue that I'm wondering if you know of a workaround. My client is using FIFO perpetual, and we have a scenario where they received some inventory in at a higher cost before realizing it should have been lower. If they want to adjust those specific items without impacting previously received inventory or other FIFO layers, what options do they have? As you said, if they do a simple inventory adjustment it will withdraw the first cost layers first. We want to adjust only the latest cost layer, or even a layer somewhere in between.

The only thing I could think of is doing a Purchasing Return to return the inventory received on the specific PO at the wrong price. I'm thinking that will ensure that the correct cost layer and items are removed. Then cut a new PO and receive the inventory in at the correct cost. Do you see any issues with this method or have any ideas of another way to accomplish this?

Thank you in advance for your advice.

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