Inventory value

Hello everyone!

Currently, the inventory value is set to be the standard cost method.
How do I change this to an average method?

Please let me know how do it…

In company configuration under all module—>General, we can set the costing method as Average. This will result into whenever a new part is selected it will by default bring costing method as average.
For parts currently in inventory first change the Quantity in hand to zero using Quantity adjustment , do the cost adjustment from standard to Avg and fill the avg rate for part and then using quantity adjustment again put the on hand quantity.

Do what was mentioned above for all parts, not just those with a QOH in inventory. Luckily they won’t need to be qty adjusted to zero first.

If you have DMT, it will go a lot faster.

Thank you very much for your reply. I have one more question.
If I do the work, what will happen to the Inventory value before the work?
Does the old standard cost method apply? Or is it applied as a new average method?

1. When you zero out the qty of a part that is currently using STD costing, inventory value will go down by the qty x the STD cost. The other side of the GL tran will go to a variance account. The exact acct might depend on the reason code used.

2. Changing the part from STD to AVG has no effect on the GL (because there is zero on hand at the moment)

3. Before doing a qty adjustment to get back to the original QOH, make sure the AVG cost for the part is equal to the STD cost.

4. Do the qty adjusted to get the qty correct. This will increase the inventory value to the qty x the AVG cost. It will Use the variance account for the offsetting account.

This last step will be equal and opposite to the first step (if AVG cost = STD cost), so no net change to the GL.

Make sure you use the same reason code for step 1 and step 4.

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Thank you very much for your reply. I have one more question.
AVG cost is not equal to STD cost. What should I do in this case?

do a cost adjustment and set the AVG cost equal to the STD cost. Doing this when there is zero QOH will create no GL transaction.