Specifications

Chapter 5. Inventory
186 Dim11
Costs & Prices
Inventory Costs
The Dimensions system allows for the following costs for each item:
Ø Average Cost
Ø Last Cost
Ø Market Cost
Ø LIFO (last in first out)
These costs are held in the Inventory Store File (IM2.D) which allows for different
costs from one store to another. All costs can be up to 7.2 digits long (9999999.99).
The daily Sales Analysis report as well as the group totals sales analysis reports
allow you to print showing gross margin based on either average or market cost or
both. Purchasing, receiving, physical inventory count, as well as some inventory
reports allow you to choose among several options for cost.
Ø Average Cost
It is especially important to have a correct average cost for your inventory
items. The average cost not only affects your inventory value, but it is the cost
that is updated to cost of sales and inventory in the General Ledger.
Average cost is updated during inventory receipts. As receipts are entered,
the computer uses a weighted average to compute the new average cost. For
example, you have 10 hammers with an average cost of $10.00 each. You
receive 10 additional hammers with a new cost of $12.00 each.
# UNITS AVG COST EXTENDED COST
Beginning Balance 10 10.00 100.00
Inventory Receipt + 10 12.00 + 120.00
______ _________
20 220.00
Extended cost 220.00 / Total units 20 = 11.00 (new average cost)
Since average cost is updated to the General Ledger, changes to average cost
must be made through inventory adjustment or physical count procedures
because those procedures include a G/L value update.
F IMPORTANT: Once the average cost is entered initially, you must never change it through
inventory maintenance. It should only be changed through inventory adjustment
or physical count procedures.
Ø Last Cost
Last cost is updated every time there is an inventory receipt entered. It is a
straight-through update. That is, whatever cost is entered on the receipt is
used for last cost in IM2.D. If there are two receipts entered on the same day
for the same item, the cost on the last one posted is used as the last cost.
F NOTE: When setting up originally, the average and last costs are usually the same amount.