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Question about Landed Cost adjustment

  • 19 August 2022
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If we create a sales order with a cost of 11.00 and subsequently we create a landed cost adjustment that adjusts the cost to 11.50 is any sales order with that updated with the new cost?

 

What if we’ve created a shipment for the item. Will the system adjust the cost if a landed cost adjustment is made after the shipment.

 

I would imagine that once it’s invoiced the cost adjustment will not affect it.

 

So, my question is at what point will a landed cost adjustment affect the cost of the item as related to a sale of that item.

Thanks

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Best answer by Laura02 20 August 2022, 01:39

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Userlevel 7
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Hi @shmaryarichler 

A few things here:

  1. What is the Valuation Method on the stock item?
  2. The cost will not be updated on the stock item until the inventory adjustment is released therefore, the current invoice in the system will not have the change applied to it. 

Here is more info on the adding costs:

 

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Hello @shmaryarichler ,

You are correct in guessing that the cost of previously sold items is not adjusted by landed cost transactions that are entered after the items are sold.

Landed Cost adjustments will adjust items that are on hand at the time that the landed cost is released.

If the item’s valuation method is FIFO or Average Cost: If the items are still on hand, their costs are updated by the Landed Costs.  If the items related to the Landed Cost are already sold, then the Landed Cost transactions will be posted to Landed Cost Variance.

If the item is Standard Cost, then the cost of the items is never updated (whether items are sold or still on hand) and the Landed Cost *always* posts instead to Landed Cost Variance.

Check with your CPA to be sure, but I expect Landed Cost Variance should be included in the COGS section of your P & L.  Therefore it is considered part of inventory costs even after the items are sold.

I’ve created and attached an example so you can see the steps leading up to the Landed Cost entry, and the entry that results for items that are sold and for items that are still on hand.  Enjoy!

 

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Hi Laura,

 

Thanks for the response. We are using Valuation Method: Specific and tracking items by lot number. I understand that once the item is sold (removed from inventory) via invoicing the cost would not be adjusted on the invoice. But if I post a Sales Order then the item is still on hand until I release the shipment. Will the cost be adjusted on the sales order that has not been shipped?

 

Thanks,

Badge +18

Hello Shmarya,

In my testing of a FIFO item, the Average cost updated on the open orders when more items were received, but not the Unit Cost. Later when the Order was released, a proper FIFO cost posted to COGS.

I don’t have a Specific ID item and I don’t have time for more testing today.  If you haven’t tried the testing steps that I gave you yet, I encourage you to try adjusting cost of a specific cost item while it’s on an open sales order in your Test tenant. To find your testing tenant, look on the sign-on screen in the Tenants list. 

Good luck!.

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