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Question regarding FIFO inventory valuation method for sales

  • 4 August 2021
  • 2 replies
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Userlevel 1

A client would like to use FIFO for their inventory valuation method.  They use Batch control and expiry.  I have ticked the “cost sep” on the Warehouse location (they only use one location).

When entering a Sales Order however it is only taking the cost of the first receipted qty.

Is this the way the system works? I am assuming yes bc at the Sales stage the inventory has not been allocated yet so there is no way of picking up the cost?

Regards,

Laura

 

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Best answer by Harshita 19 May 2023, 08:48

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Userlevel 6
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Hello @laurac,

In Acumatica, when using FIFO (First-In, First-Out) as the inventory valuation method and Batch control with expiry, the system calculates the cost based on the first receipted quantity. This behavior is expected, and your assumption is correct.

During the sales stage, when entering a sales order, the system doesn't allocate specific inventory items yet. Therefore, it doesn't have the information to pick up the exact cost associated with the specific items being sold. The cost calculation is based on the first receipted quantity to ensure the FIFO principle is followed.

However, it's important to note that when the order is shipped or invoiced, Acumatica will recalculate the costs based on the actual quantities being shipped or invoiced. At that point, the system will consider the specific items being sold and apply the appropriate costs based on the FIFO method.

In summary, during the sales order entry stage, Acumatica uses the cost of the first receipted quantity for inventory valuation when using FIFO with Batch control and expiry. The system will recalculate the costs based on the actual quantities being shipped or invoiced, ensuring accurate valuation according to the FIFO principle.

 

Regards.

Badge +16

Hello @laurac ,

In addition to the explanation Harshita provided, we could have many open sales orders containing the same FIFO item.  At the time of order entry, we don’t yet know which sales order might ship first. Therefore it is the IN Issues batch that updates Inventory costs later in the Sales Order process.

Laura

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