I notice that the physical inventory reconciliation report uses the average unit cost unless it's zero, in which case it reverts to the recent cost. This is perfect. However, when the inventory count is posted it uses the recent cost for everything. Why is it doing this? Shouldn't it be posting the amounts it says in the inventory reconciliation report? Is there a setting somewhere to correct this?

We use IC 8.1E (140722) with moving average costing method and we imported quantities only (without cost) thinking that Adagio IC would handle the costing correctly for us.

Hi Susan,

If you adjust the quantity only, then there is no adjustment to the cost. You are either increasing (if you reduce the quantity) or decreasing (if you increase the quantity) of the value of each component in inventory.

Say, for example, the inventory worksheet says you have 4 items worth $200 total in inventory ($50 ea average cost). If you then adjust the quantity down to 2, then each item cost you $100. If you had imported the cost as well, then there would have been an adjustment to the average cost of the items down to $100 (keeping each item valued at $50) and an entry of $100 to the inventory write-off account.

Hi Andrew,

What you are describing is how it works with IC Inventory Adjustments if you do QTY only. However, Physical Inventory does not work the same way. If you import and post QTYs it adjusts the cost with it. The only problem I just noticed is that it uses recent cost instead of average unit cost.

I restored from a backup and then instead of posting a physical inventory worksheet, I imported inventory adjustments with the correct cost. I think this is a better way to post an inventory count. It gives you more control of the cost.

Hi Susan,

Glad to hear you're back on track. I didn't read all the words in your original post. I'll have QA take a look at your observation next week.

Thanks

Hi Susan,

We couldn't easily recreate what you saw. Perhaps there was a timing difference and new receipts had updated the cost fields before the physical inventory count was posted.

As you said, adjustments may be an easier way for you to go.

Hi Andrew,

Our inventory and all Adagio was frozen so there were no entries of any kind on Adagio between the time we created the worksheets and posted the inventory reconciliation.

Here's what I did:

1. Printed Physical Inventory Worksheet (created a workfile).
2. Counted and then imported the Physical Inventory Worksheet with the actual count.
3. Printed Inventory Reconciliation (uses average cost and reverts to recent when there is no average cost).
4. Posted Inventory Reconciliation (uses recent cost). <- This is the problem.

I assume I have been posting recent costs all these years and not realized it because I assumed that I was posting the same amounts as the Inventory Reconciliation said. This year I checked and discovered that the adjustments that are posted are all using recent cost.

To avoid this problem going forward I made a note to use this method instead:

1. Print Physical Inventory Worksheet. Create a workfile (spreadsheet).
2. Count and add quantities and costs to spreadsheet. Use average unit cost when the original qty is greater than zero. Use recent cost when original qty is zero.
3. Total up the quantity variances times the cost in the spreadsheet to determine total loss or gain.
4. Import Inventory Adjustments for variances including the cost. Post.

Hi Susan,

Update: We were able to recreate a problem. For whatever reason, if the quantity adjustment of the imported physical inventory count decreased the quantity on hand, then the correct average unit cost was used. But if the quantity adjustment was for an increase, then the most recent cost was used. Indeed this is incorrect and inconsistent.

In some cases the recent cost and average unit cost are the same so I wouldn't notice. Other times they are very different. We make an effort to keep our costs straight so we know our true landed cost and can price our product correctly. With almost 500 inventory adjustments this year for our yearly count, this problem would throw way too many items off.