Hi All,
Can someone explain how the Estimated Unit Cost field works? I looked up the help section and I don’t quite understand. Any help is appreciated.
Hi All,
Can someone explain how the Estimated Unit Cost field works? I looked up the help section and I don’t quite understand. Any help is appreciated.
Best answer by Kandy Beatty
FIFO.
Please note, we are still on 2021R1 working on upgrading. Not sure if that matters.
The version should not matter but FIFO is a different type of Valuation Method for Inventory. It is based on layers for costing.
If the FIFO valuation method is assigned to a stock item, its unit costs are recorded in layers, each of which is identified by the receipt date, the quantity, and the purchase price (unit cost).
When a certain quantity of the stock item is issued, the cost for the item is assigned starting with the earliest available cost layer. If the quantity to be issued is greater than the quantity in the earliest layer, the entire quantity from the earliest layer will be issued (with the associated unit cost) and the rest of the required quantity will be issued using the next earliest layer (with another unit cost).
Suppose that a stock item was purchased in the following way:
The total stock cost is (5 * $8) + (5 * $10) = $90.
Then suppose that a sales order has been created with 8 items. All units from cost layer 1, and three units from cost layer 2 will be used to complete the transaction, with the extended cost equal to (5 * $8) + (3 * $10) = $70. For the next sales order, there will be no more items with the $8 unit cost.
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