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Inventory Valuation Methods
General Information
M.O.M.
enables you to select one of three different Cost of Goods
accounting methods to determine how inventory is to be valued. This
method has to be established in the Maintain Global
Parameters - Accounting function.
Inventory Valuation Methods
-
Average
Cost - using this method, M.O.M. updates the value of your entire
inventory each time a delivery is recorded by averaging the buy
price for all items in inventory at the time of each delivery.
"Cost lots" of inventory are not maintained for valuation
purposes.
-
Last In
First Out (LIFO) - using this method, M.O.M. keeps a separate "cost
lot" for each delivery recorded. Under the rules of LIFO, stock
items from the most recent lot delivered (last in) are sold to
customers before (first out) selling items from previous lots
-
First In
First Out (FIFO) - using this method, M.O.M. also keeps a separate
"cost lot" for each delivery recorded. Under the rules of FIFO,
stock items from the oldest lot (first in) are sold to customers
(first out) before selling the more recent lots.
Changing inventory valuation methods "mid-stream"
Be advised
that changing from one inventory valuation method to another after
using M.O.M. for a while has certain limitations and consequences,
specifically,
-
Changing
the Inventory Valuation Method from Average Cost to LIFO or FIFO
will create a lot for the Average cost, then subsequent lots will
be created as the lots are received.
-
Changing
the Inventory Valuation Method from LIFO or FIFO to Average Cost
will use the current lot until it is depleted, then M.O.M. will
choose the next available lot, average the unit cost, and then
deplete from that lot. This process will continue until all of the
unit lots have been depleted.
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