Introduction in Dynamics NAV Costing

In almost all NAV implementations, we need to configure and use costing (inventory, manufacturing, jobs…). This is one of the main functionalities in all ERP solutions as well as in NAV. Because of that I will prepare the series of costing articles with an overview of the principles used within the costing area.

In this first part, I will make a small introduction about costing methods. Microsoft Dynamics NAV supports the five following costing methods:

  • FIFO
  • LIFO
  • Average
  • Specific
  • Standard

Now, in the following part I will just describe these costing types.

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FIFO

The FIFO costing method means “First In First Out”. It first assigns the value of the increases with the earliest posting dates on inventory. COGS is calculated using the value of the first inventory acquisitions.

An item’s unit cost is the actual value of any receipt of the item, selected by this explained FIFO rule. In inventory valuation, it is assumed that the first items placed in inventory are sold first.

LIFO

The LIFO costing method means “Last In First Out”. It first assigns the value of the increases with the most recent posting dates on inventory. COGS is calculated using the value of the most recent inventory acquisitions.

An item’s unit cost is the actual value of any receipt of the item, selected by previous explained LIFO rule. In inventory valuation, it is assumed that the last items placed in inventory are sold first.

Average

The Average costing method calculates a weighted average of the remaining inventory on the last date of the average cost period in which the inventory decrease was posted. COGS is calculated using the average value of the inventory acquisitions.

An item’s unit cost is calculated as the average unit cost at each point in time after a purchase. For inventory valuation, it is assumes that all inventories are sold simultaneously.

Specific

The Specific costing method overrides assumption about how cost flows from inventory increase to inventory decrease with the accurate cost information, creating a fixed application between these entries.

An item’s unit cost is the exact cost at which the particular unit was received.

Standard

The Standard costing method works with predetermined costs (rather than actual cost) for all inventory increases and it affects the value of the inventory decreases.

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.

Conclusion

This was only small introduction about costing types as preparation for the more advance knowledge about using costing in Microsoft Dynamics NAV. In the following articles, I’ll describe more about facts when users need to use these costing methods as best practices. I’ll write about all details in posting results and posting rules as well.

MS SQL is a Global ODBMS Leader

A few days ago, I’ve wrote about place of Power BI in Gartner survey about BI & Analytics solutions. Power BI was a global leader on Gartner Magic Quadrant. Now, we have new Gartner story about Operational Database Management Systems. For the first time, MS SQL is an absolutely leader and on better position in comparison with Oracle database.

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The operational database management system (DBMS) market is concerned with relational and nonrelational database management products suitable for a broad range of enterprise-level transactional applications. These include purchased business applications, such as those for ERP, CRM, catalog management and security event management, and custom transactional systems built by organizations’ own development teams. Also included in Gartner’s definition of this market are DBMS products that support interactions and observations as new types of transaction. (from Gartner)

Microsoft deserves this position because they market its SQL Server DBMS for the operational DBMS market, as well as the Microsoft Azure SQL Database (a DBMS platform as a service), and the NoSQL DBMSs Microsoft Azure DocumentDB and Azure Tables.

It is very important that Microsoft continue with working on enterprise SQL Servers and on Azure SQL as well. And finally about NAV. Microsoft Dynamics NAV (from NAV 2016) works on both of these SQL versions and I think this cooperation between strong database and ERP solution will continue to deliver amazing business solutions.