I don’t understand the logic. But it was easy to re-create the scenario, and I did.
We use standard cost, but I’ve used the “last” cost data in reports as a very easy way to communicate the most recent PO receipt price (or job receipt cost).
But in this case there was a DMR-STK as a more recent “receipt” (I guess?) than the newest PUR-STK, so it updated the Last cost to… the standard cost. Go figure.
Today a novice asked why this part was $200 higher than the last PO and I said, let me show you why, young fella… and then I looked stupid when it was not any reason I expected.
Did anyone expect this behavior? I see no mention of it on this site.
[And yeah, the standard is unusual to be set so much higher than what we normally pay, but it helped us find this feature!]
Yes, especially if the DMR originated from a PO receipt that was inspected, failed, and then later accepted. The PO was never received to inventory and so the DMR-STK must update the average and last costs.
I’m willing to bet that our Finance team has done this exact same thing when preparing for a standard cost roll to get last price paid for purchased materials, and they have probably been affected (whether they noticed or not) by this same thing. We have materials go into inspection/DMR from stock and get accepted back for various things, too.
I’m actually more surprised that the last cost from PO receipts matches the receipt price and isn’t coerced to match the standard cost. As far as I’ve seen, the average cost fields are always forced to match the standard cost when materials are received from a PO (or a job, but all our manufactured parts are Standard) and so the behavior is the same whether the receipt is a PO, job, DMR, or whatever.
Inventory, the cost is whatever the cost of the part is, which is determined by the costing method.
For something like an Operation, that WIP quantity being failed/rejected has accrued cost as a result of the manufacturing process, that cost has to go somewhere. It can either go along for the ride on the DMR, or get applied to the WIP quantity that doesn’t get rejected and eventually makes it’s way into inventory.
@hackaphreaka Makes sense. I was thinking you meant the DMR comes in at one number and goes out at a different cost. But you mean it can come in at a non-standard cost from a job. Good point.
You probably knew it for a fact, but I had to see it, so I ran this experiment and indeed it does.
Like personally surprised or logically? The logic works - PUR-STK is for the PO amount and ADJ-CST handles the difference to standard. (Often called PPV, but that term seems to be used in Kinetic to mean invoicing discrepancies.)
Yeah, nevermind. I just looked up some parts where the standard is (for example) $15 but we most recently bought it for $20. The Average and Last costs both show $20.
I think I was remembering this backwards or just made it up in my head, I guess.
Logically, I think you’re correct. Putting parts into another inventory bucket (Inspection and DMR are still part of your overall Inventory) shouldn’t trigger a new opportunity to update the last cost. Even if your part was set up as Last costing method, this could still cause your last cost to update “incorrectly” if you had parts on a DMR from inventory, received goods from a job or PO at a different cost, and then accepted the DMR (which would have been using the previous last cost from before the job/PO receipt).
