Calculating Inventory Cost - Adjustments

The process first determines if the item is serialized, in this example the items are not serialized.

For non-serialized items, e-automate queries the item’s costing pool. Inventory items in e-automate can have a warehouse or a company cost pool. The cost pool is dependent on where the item is currently warehoused in e-automate.

Determine if the warehouse is included or excluded from average cost calculations.
Note: Cost pools can be included in company average cost calculations or excluded from cost calculations based on company warehouse advanced settings.

Once the cost pool is determined, e-automate determines the following about the cost pool:

Current on hand quantity

Current average cost of the cost pool

Current total cost of all items in the cost pool.

E-automate then determines the system’s defined non-serialized inventory costing method. Based on the determined costing method follows one of the following processes.
Note: When an e-automate database is first created, the costing method for non-serialized items is specified. The costing method can be one of three methods: weighted average (WAVG), first in first out (FIFO), or last in first out (LIFO).

When using weighted average cost, e-automate gets the quantity from transaction and compares the on hand quantity in the cost pool.

If the on hand quantity is less than the quantity in the transaction, e-automate uses the on hand quantity as the quantity that is going to be adjusted.

If the resulting quantity is greater than zero, then multiplies the quantity times the average cost and uses the result as the adjustment.

If you have Sufficient Quantity:

When there is sufficient quantity on hand to perform the adjustment, e-automate uses the following process when the costing method for the non-serialized inventory is FIFO.

E-automate starts at the older FIFO layer based on received date and time, if there is more than one layer entered on the same transaction date, e-automate uses the oldest layer based on the database time stamp.

If e-automate exhausts a layer, it moves on to additional layers based on the older remaining layers until the adjustment has been completed.

If you are in Target layer mode (PO variance):

If you are adjusting the cost of inventory based on a purchase order variance, e-automate attempts to update the target layer that was created at the time inventory was received, this is called Target Layer Mode. When in Target Layer Mode, e-automate gives priority to the layer that was created during the original transaction, then moves to the oldest layer to adjust.

If you have Insufficient Quantities:

When there is insufficient quantity to perform the adjustment, e-automate uses the account designated on the adjustment code on the transaction. If there is not an adjustment code on the transaction, e-automate uses the default administrative inventory adjustment account found in Tools > Options under Inventory and in the field labeled, Inventory adjustment.

If you have Sufficient Quantity:

When there is sufficient quantity on hand to perform the adjustment, e-automate uses the following process when the costing method for the non-serialized inventory is LIFO.

E-automate starts at the most recent LIFO layer based on received date and time, if there is more than one layer entered on the same transaction date, e-automate uses the newest or most recent layer based on the database time stamp.

If e-automate exhausts a layer, it moves on to additional layers based on the next newer remaining layers until the adjustment has been completed.

If you are in Target layer mode (PO variance):

If you are adjusting the cost of inventory based on a purchase order variance, e-automate attempts to update the target layer that was created at the time inventory was received, this is called Target Layer Mode. When in Target Layer Mode, e-automate gives priority to the layer that was created during the original transaction, then moves to the newest or most recent layer to adjust.

If you have Insufficient Quantities:

When there is insufficient quantity to perform the adjustment, e-automate uses the account designated on the adjustment code on the transaction. If there is not an adjustment code on the transaction, e-automate uses the default administrative inventory adjustment account found in Tools > Options under Inventory and in the field labeled, Inventory adjustment.