Inventory Costing in AX 2009

I wanted to explore some scenarios, illustrate a few important concepts related to inventory costing--look at Differe NCEs between physical and financial inventory, and how this affects inventory values. Please reply to the Post if you have a questions or comments, or if you is interested in additional posts on this topic. This isn't intended to being a comprehensive look in AX inventory costing, but just a few concepts that I view as important To understanding the big picture of AX costing logic.

For my test, I created a new item, using a FIFO costing model. The Inventory model group has three settings I want to point out and illustrate:

• Physical negative inventory
• Financial negative inventory
• Include Physical Value

Note that the test item has physical and financial negative inventory unmarked, and ' include physical value ' is marked:

To start, I-Create a purchase order line for the item and post the packing slip for a quantity of ten at $ each. The PO packing slip is considered a ' physical ' inventory update. You'll see the inventory transaction and the item's on hand reflect the physical cost amount:

This is a important concept as you'll see the separation of physical and financial inventory throughout AX. Understanding the impact is important when defining your setup and processes. Below is a list of the transactions so result in physical inventory value and those this result in financial inventory V Alue.

Transactions that affect physical value

Purchase Order Packing Slip

Sales Order Packing Slip

Production Order report as finished

Production picking list journal

Transactions that affect financial value

Purchase Order Invoice

Sales Order Invoice

Production Order End (This would move the RAF and the picking List transactions into a financial status)

Inventory Journal (all Inventory journals affect financial value only)

Next, I entered a sales order line for the item, quantity, and attempt to post the invoice. Although I has physically received units of this item into the stock, my sales invoice posting fails with an error message : "Item consumption for 10.00 cannot being updated because the cost of is known only for 0.00 in stock."

The error is thrown because of the model group setting ' negative financial inventory ', which are unmarked for our item, MEA Ning that we don ' t allow negative financial inventory. If the sales order is for a quantity of, I would receive an error message: "15.00 cannot is picked because only 10.00 Is/are available from the inventory "

This error message was driven by the ' Physical negative inventory ' checkbox, which does a validation against the current ' t Otal available ' on hand inventory for the item. In order to post the this invoice, we need to the sufficient financial inventory in stock. To satisfy the requirement, you would has to financially the update an outstanding order, or create and post a new order. For we test, I created a separate purchase order for quantity of ten, unit cost $ $, and post the Invoice for this purchase Order (financially updated). Note that this is a different unit cost, than were used on the previous purchase order ($).

Reviewing the inventory transaction for this new purchase order, you see that a financial cost amount is updated. Additionally, the On-hand for the item now reflects the $ from the packing slip updated purchase order, as well as the $ From the invoiced purchase order.

Now the I have sufficient financial inventory, I posted my sales order invoice. There is important concepts to point out on the sales order inventory transaction after I post the invoice. First, you'll see, and the cost of the quantities sold are an average of the and receipts that has been posted: ([email PR Otected] $ + [email protected] $)/= $1.50 per unit. Take a look at the previous screenshot and you'll see this in the "On Hand" form, the ' Cost price ' field holds the calculate D Average Cost. Although we defined this item as a FIFO item, the value of the outbound quantities is valued at the current running Avera GE for the item. You'll see the approach used for all issue transactions, and except for items using a standard cost valuation model.

*note-marking may also impact these outcomes.

The second thing is, our model group setting for ' Include physical value ' have made an impact on the outcome. Since we have it marked for this item, the physically updated purchase order is used in the calculation of the running AV Erage. The setting simply tells AX whether or not to use physically updated receipts when calculating the running average for the Item. If we had this setting unmarked, only the financially updated receipt would has been used in the calculated value of the Issued quantities. We now know that this would have a significant impact on the valuation of outbound quantities at the time of posting.

Since This was a FIFO item, we know that the $ used to value our sold quantities is incorrect. AX requires that a periodic ' inventory close ' is processed in order to align the cost of goods sold with the items ' assign Ed valuation models. After running the close, notice that the sales order transaction now reflects a cost amount $ with the adjustment of $. Another thing to point out was that no ' settlement ' occurs. Typically, the inventory close process would settle receipts against issues. However, since this sales transaction aligns with a physically updated receipt, no settlement occurs. Once the purchase order is invoiced, the close process would settle the transactions against each of the other.

Recap:

• AX tracks inventory value in separate buckets:physical and financial
• All issue transactions is valued at the current running average cost price for the item
• You can select whether physically updated receipts is included in the running average calculation
• A periodic inventory close must be run to align the COGS with the item ' s valuation Model

More about the ' Include Physical value ' setting:

This should is used for certain scenarios. Weighted average models should not use the setting due to the following scenario:

1. Receive @ $ each (financial/invoice posted)

2. Receive @ $ each (physical/packing slip post)

3. Issue (Financial/invoice Post). $ due to the fact that ' include physical ' are marked for the item. Also, this transaction requires that negative financial inventory are allowed for the item.

4. Run Inventory Close

Results:

Ten of the issue quantities is settled against the $ receipt and the other 5 remain unsettled at the $ . This leaves us with 5 on hand, valued at $ each (which are higher than any single receipt cost we have)

Other resources:

Http://www.microsoft.com/downloads/en/details.aspx? familyid=01873047-ee96-40d2-b724-0a7cf672ab39&displaylang=en&displaylang=en

Https://mbs.microsoft.com/customersource/training/trainingmaterials/student/course50191.htm

http://dynamics.microsoftelearning.com/eLearning/courseDetail.aspx?courseid=94369

Http://www.axapta.cn/?/question/32

Inventory Costing in AX 2009