Multiple costing methods to choose from in Microsoft Dynamics Business Central (NAV) determines if an actual or a budgeted value is capitalized and used in the cost calculation. the chosen method, a costing practice will determine if a budgeted or actual value is used in the cost calculation and it will impact how the cost flow is recorded.
Dynamics 365 Business central features integrated inventory management and costing through perpetual inventory. Dynamics Business Central allows the specification of a Costing Method per Item master record. This makes it possible for businesses to select a “mixed model” of costing. For example, a manufacturing firm may choose FIFO for Items it purchases (i.e. raw materials) but use a Standard Cost for the goods it manufactures. However, in practice most companies prefer and master only one method for the system.
Below are the costing Method options available within Microsoft Dynamics 365 Business Central \Navision
- FIFO: An item’s unit cost is the actual value of any receipt of the item, selected by the FIFO rule. In inventory valuation, it is assumed that the first items placed in inventory are sold first.
- LIFO: An item’s unit cost is the actual value of any receipt of the item, selected by the LIFO rule. In inventory valuation, it is assumed that the last items placed in inventory are sold first.
Disallowed in many countries/regions, as it can be used to depress profit.
- Average: An item’s unit cost is calculated as the average unit cost at each point in time after a purchase.
- Specific: An item’s unit cost is the exact cost at which the particular unit was received. In production or trade of easily identifiable items with fairly high unit costs.
- Standard An item’s unit cost is preset based on estimated. When the actual cost is realized later, the standard cost must be adjusted to the actual cost through variance values.
Dynamics 365 Business Central \ NAVISION also offers several options for adding indirect costs to inventory value. Item Charges may be used to pass through additional costs in a landed cost model.
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