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Estimated Unit Cost from Inventory Summary

  • 26 February 2023
  • 10 replies
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Userlevel 3
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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.

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Best answer by Kandy Beatty 27 February 2023, 14:31

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Hello @mna10  ,

It might help us to answer if we can see an example of your inventory item with a figure in the Estimated Unit Cost.  It will also help us to know the Valuation Method for your item and whether or not you allow negative quantity.

I’m not sure I can improve on Acumatica Help’s explanation… but I will venture a guess that Estimated Unit Cost might be necessary when a particular item has no quantity in stock, and therefore real cost is not known. When we have items with Specific Cost, FIFO, Average valuation methods and there is nothing on hand, we can’t know the real cost until the item is received again.

Thank you.

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Hi @Laura02 

Please see screenshots below.

Just trying to understand where these numbers are coming from. These items are lot controlled. We had a user give an estimate unit cost off these numbers. However by the end of the day, these number have changes so we don’t know if those estimates were correct.  Also, if you look at the item file, the last cost and average costs are different.  

We don’t allow negative QTY.

Any information would be helpful as we are just trying to understand best way to capture correct costs, especially with lots.

 

 

Userlevel 7
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HI @mna10 

To answer your question. the Estimated Unit Cost is based on the last cost of the item. For example, my AACOMPUT01, the last Cost is $250

 

The Estimated Total Cost is going to be the Total of my 60 items available times $250 each for a total of $15,000.00.

 

This help article on the cost of inventory also may help you:

https://help-2022r2.acumatica.com/(W(12))/Help?ScreenId=ShowWiki&pageid=35b96e85-e2d5-4b38-a050-00b26423de3b

 

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Hi @kandybeatty49,

That is what I thought too however, it does not match my last cost. Please see below.

This is a lot controlled item so not sure if that has to do with it.

 

Userlevel 7
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Hi @mna10 

What is your Valuation Method for that Item?

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Hi @kandybeatty49 

FIFO.

Please note, we are still on 2021R1 working on upgrading. Not sure if that matters.

Userlevel 7
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Hi @kandybeatty49 

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:

  • Cost layer 1: May 10, 5 units at $8 each
  • Cost layer 2: June 10, 5 units at $10 each

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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Hi @kandybeatty49 

Thanks for the explanation.

So what cost would show in the Inventory Summary Expected Unit Cost then since it is FIFO? Would it be the $90 in your example above? Sorry.

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In the case of FIFO inventory valuation method, the system doesn’t yet know which Sales Order will come out of inventory first.  Therefore all costs are estimates until the shipment is completed.

Perhaps there are 12 orders in the process of Picking and/or shipping and 50 layers of FIFO. Maybe we have new lots coming in from PO Receipts or from Manufacturing.  We can sell out of a lot or receive new losts … or not , before any particular order ships. 

Compare the estimated unit costs that you are seeing on the Inquiry to the layers that are in stock for the items (detailed Inventory Balance report or detailed Inventory Valuation report). Since the system can’t know the cost for what layer may ship to this particular customer we are quoting, Acumatica may be using an average cost of the FIFO layers that are on hand in the warehouse on your quote, or a weighted average cost.

Userlevel 7
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Hi @kandybeatty49 

Thanks for the explanation.

So what cost would show in the Inventory Summary Expected Unit Cost then since it is FIFO? Would it be the $90 in your example above? Sorry.

It’s going to differ based on how many orders you have fulfilled and what the original qty was that you brought in. FIFO is different than the other valuation methods to track due to layering. 

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