We have 9 warehouses and use average cost. We want the same stock item to have the same average cost across all warehouses. Unfortunately, this isn’t working for us, and each warehouse has its own average cost. This makes sales margin reporting a nightmare. Our auditors are also questioning our inventory costing method.
Can Acumatica do the same average cost for an item across all warehouses? The help manual says “yes”,
If the Average valuation method (also known as average moving cost) is assigned to the stock item, the unit cost will be calculated as the average weighted cost of all items at the warehouses—that is, the total costs of all quantities of the inventory items at the warehousesdivided by the total quantity.
but our support company says “no”.
thanks
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A couple of questions - is the valuation method assigned to the item class different for some items? and what is the Average Default Return Cost set to Average or Last Cost? This could affect the average cost. Can you provide an example where a single item has different average costs for different warehouses?
Hi Eric
Thanks for your reply. Below is transaction details for an item. You can see the unit cost is different for each of the 3 warehouses. I’ve also attached the item details, item class details, and the warehouses average default return cost.
kind regards
Peter
Item details
Item class details
warehouse return costs
Is the Cost separately checkbox selected for the locations in each warehouse? This could be affecting the cost of the items within each warehouse.
Cost Separately
A check box that you select if the costs for goods available at this location will be calculated separately from costs calculated at the system-level; that is, for FIFO and Average valuation methods, separate cost layers will be created for this location. You cannot select this check box if this is the only location at the warehouse.
We recommend that you not change this option once it has been set.
If the location is linked to a project, this check box is selected by default and cannot be edited.
Hi Eric
That was my first thought and no, the cost separately is not ticket.
kind regards
Peter
Hi @ericwolfe74
The below article gives you some clarity
Hi Manikanta
Thanks. I see that the last post from 4 months ago on that thread was:
Hi Folks, I have a question on this topic:
Is it possible to configure Acumatica to use stock item’s general Average Cost instead of Warehouse specific Average Cost for Issue (shipment) Transactions?
This implies that Acumatica does not do average cost across all warehouses but is per specific warehouse. That’s not general accounting practice and makes margin reporting a problem. Is this right?
@McAuley Have you found a way to have Acumatica calculate the AVG cost across all warehouses regardless of which warehouse is selected on the SO line?
Hi Ellie
Sadly no. I’m putting my efforts into working on how we can move to Business Central. In New Zealand, BC is almost half the cost of Acumatica and does a lot more, like average cost.
Put to one side the “can we”, with cost rates of the same unit varying that much you might like to think about “should we”? That’s a big variation within the same SKU. Consider whether this is ongoing price variety or maybe due to a single shock event but I would break your problems in two;
if the unit rate per warehouse are based on what you paid for stock through PO/Invoice, and you’ve done your NRV analysis, the auditors should be able to get comfortable with some purchase invoice vouching and a discussion with your purchasing team as to why the costs swing so greatly.
if you’re looking to stabilise your margin reporting and these kinds of cost swings are expected to continue, consider using standard cost with frequent cost revisions (this is allowed under NZ IAS 2.21). The way I’ve seen this done in practice is if your “Purchase Price Variance” and “Standard Cost Adjustment” P&L accounts are not material to the overall financials or as a percentage of your end of period inventory then inventory balance must be pretty close to cost (meeting NZ IAS 2.9). I was at a big 4 audit firm on a large privately held manufacturer in Australia and this was an accepted approach between 2015-2017, but your current auditors will make their own conclusion.
Good luck!
Hi Chrisgold
I was Big 4 too. Different costs for same item across warehouses is not right. And we are talking average cost not standard cost, so price variance isn’t applicable.
But as I say, I’m pushing for business central as it doesn’t have this issue or several others.
This implies that Acumatica does not do average cost across all warehouses but is per specific warehouse. That’s not general accounting practice and makes margin reporting a problem. Is this right?
I’ve read a little further back, and apologies, as it was on top I assumed this was a recent thread.
In my experience location specific costing is definitely GAAP as well as being required by IFRS. If you consider the text from the standard;
10 The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition
11 The costs of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities), and transport, handling and other costs directly attributable to the acquisition of finished goods, materials and services. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase.
23 The cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects shall be assigned by using specific identification of their individual costs.
As an example, if you had the same stock item at two locations, location A and B, as required you capitalised the transport costs from the supplier to the intended warehouse. The transport costs to location B are notably higher. Or a better example might be that one location attracts import duties, but the other does not. With items geographically separated, and thus not ordinarily interchangeable, they should be held at their individual costs.
If the business averaged their unit rates across both locations that would misstate the substance of the transactions, which for this example is that the costs to sell goods are higher at location B, leading to lower margins.
Further, if the items at location B are slow moving, having their unit cost lowered by the cheaper/faster selling units at location A would also diminish the NRV write-down.
If location A and B were geographically close together, then there might be an argument to blend the location costs as the business could draw interchangeably from the locations, but at that point it would be very unique for the costs per location to materially differ. A quick read of paragraph 26 might lead to the conclusion that geographic locations shouldn’t lead to separate costs, but this is only in regard to cost formulas (i.e. average or FIFO).
I’m not sure you will agree with me, but location specific costing is required by IFRS.
Apologies to any US readers, I can’t speak to detail of ASC330, but from a quick google IFRS and US GAAP don’t differ in the areas mentioned.
