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Microsoft Dynamics GP (Archived)

Problem with Change valuation from FIFO to Average

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Posted on by Dharmesh Vyas 90

Dear All,

We are having big inventory following FIFO perpetual costing method since few years, Now as per Finance dept. request, we need to change valuation method to Average.

I have gone through all pre requisites and changed valuation method to Average for all items. But i found few items with some strange behavious.

Example:

Before Valuation method change:

Item XYZ ==> Old cost was 129.23 (as per FIFO) , qty was 152 Pcs , value was 19303.96 (as per stock status report)

Expectation:

Item XYZ ==> new cost would be 126.99 or 127.00 (as value/qty) , qty 152 Pcs , value accordingly

Result:

Item XYZ ==> New cost 127.29 (as per Avg) , qty is 152 Pcs , value became 19348.08 (as per stock status report)

Can someone please explain, what formulae system will use while changing valuation method from FIFO to Avg?? I have few more strange cases, i shall post once above case can get some clarifications.

Thanks all in advance,

Regards,

Dharmesh N. Vyas

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  • Frank Hamelly | MVP, MCP, CSA Profile Picture
    Frank Hamelly | MVP... 4,029 Super User 2024 Season 2 on at
    Re: Problem with Change valuation from FIFO to Average

    It's a complex calculation Dharmesh which looks at receipts and consumption and the timing of each.  Send me an email at fhamelly@intellpartners.com and I'll email a document to you that explains it all.

    Best regards,

  • Dharmesh Vyas Profile Picture
    Dharmesh Vyas 90 on at
    Re: Problem with Change valuation from FIFO to Average

    Dear Frank,

    Thanks a lot for your prompt reply. Appreciated!!

    Yes, i got your point and that could be the reason and my calculation of straight avergae will not be applied here. But still i can't get how exactly it works, to be more clear on this, let me put actual qty and value for each receipt if you can provide more help.

    SITE qty value

    SITE1 1 105.64

    SITE2 1 105.56

    SITE3 69 8627.07

    SITE3 1 125.33

    SITE3 44 5687.88

    SITE3 1 129.35

    SITE3 34 4393.82

    SITE3 1 129.31

    having above data, can you please explain me how this gives 127.29?

    Again thanks a lot for your support.

    Best Regards,

    Dharmesh N. Vyas

  • Suggested answer
    Frank Hamelly | MVP, MCP, CSA Profile Picture
    Frank Hamelly | MVP... 4,029 Super User 2024 Season 2 on at
    Re: Problem with Change valuation from FIFO to Average

    Dharmesh,

    Why was your expectation that the Average Cost would be $127.00?  Was it based on 19303.96/152 pieces?  If so, you must keep in mind that GP's Average Cost is not a straight average - it is Weighted Moving Average based on the quantity/value of the cost layers.

    $127.29 Avg Cost could very well be correct based on the layers in your inventory for that item.  Print the Purchase Receipts report for the item and see if that report validates the $127.29 value.

    Hope this helps,

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