An adjustment was done to an inventory item for cost only.
Immediately before the adjustment the extended cost $8.88 per lb. The quantity on hand was 1,253.25 lbs at a valuation of $2,315.61 or a unit cost of $1.85

My first question is - why is the inventory valuation showing a cost of $1.85 and the transactions are being costed at $8.88.

An adjustment was done for $5,774.33 to bring the cost to the expected level. Only cost was adjusted not quantities. When this adjustment went in the extended cost went to $35.02 and the valuation is showing $13,774. I can not identify any other changes besides the adjustment, but even then it is not computing the way it was expected. To add further confusion when we look at the costing for the item it is calculating recent cost based on the last two receipted quantities and the adjustment does not seem to have cost for pricing purposes.