If we use LIFO method, situation is totally opposite quantity decreasing is based on the last input. When we use FIFO method, system will post quantity decreasing every time based on the first input. Now I want to give you some examples how system uses different costing methods. When the quantity on inventory is zero, the inventory value must also be zero.
I’ve already wrote basically about costing methods in Microsoft Dynamics NAV.Īnd do not forget, regardless of what costing type you use, all of them have minimum one common thing. This is the cost flow assumption part of the costing method. It also influences the unit cost calculation, which is itself used for posting to the general ledger. This is the application method part of the costing method and I’ve already wrote about it. It determines which purchase entries and sales entries will be applied to each other when you post a document. The choice of a costing method has two consequences.
This is because it is connected with fluctuations over time in the unit acquisition costs of inventory items. COGS will be an unknown value until we choose costing method for each item. We have (or we can have) exactly information about Beginning Inventory and Net Purchases, but COGS depends of Costing Method: Generally COGS (Cost of Goods Sold) is an unknown parameter that must be recorded and calculated.
