How do I force my inventory to use the (most recent cost) for shipped items. Client has some catching up to do to normalize their inventory before either (moving average and or LIFO) can be used.

Having a hard time explaining why COGS is credited and Inventory Debited, when it should be the reverse as well as (unknown ghost figures)from a shipment batch, even though when they were invoicing the most recent cost was correct.

From my investigation all of this is due to items with a (negative total cost) averaged based on QTY sold. Control Account Set is Moving Average.


Right now the Ledger is completely incorrect.
Will have to work some magic on items already posted - reverse then write a report to compute what it should have been but I need help going forward.

How do I force the system to use ((Most Recent Cost)), I am aware of the accounting implications ?

Thanks

Hello Edward,

The short answer is you can't.

But you can tell the system to use Standard cost and have the difference from Average posted to a Cost variance account. Creating a Filter which shows only those items where the Standard Cost <> Most recent cost is pretty straight forward. Also, you could import the Most recent cost into the Standard Cost field.

When there is no inventory available to process a shipment, stock items are sold at their most recent cost. Allowing inventory to go negative almost always requires an inventory adjustment at the end of the month, unless you are using Purchase Orders for Adagio.

Is this a regular sales inventory (where a shipment represents revenue) or a stores inventory (where a shipment represents an expense)? Adagio Inventory is designed to manage the former, not the latter, and hence accounts on that basis.

There is a full session on Inventory Costing and Pricing at this year's Adagio Opportunity Conference.

Hi Edward

There is no such costing method as using Most Recent Cost, the closest you can get to that is to use LIFO as the costing method. You can think of LIFO as using the Most Recent Cost of those items that are still in stock, which is not necessarity the true Most Recent Cost. However, LIFO is complicated to manage and I normally avoid recommending it unless there are special circumstances, including large purchase price swings and long holding periods for inventory.

I would second Andrew's suggestion to use Standard Costing and to make the Standard Cost field equal to the Most Recent Cost (updating from time to time).

The key to all of this working is to select the setting which prevents inventory from going negative. I'm almost sure this is what is causing your problems.

Steve