Recently I was asked ‘Can Dynamics NAV handle Average Costing?’
The answer is a resounding ‘YES’ but it was one thing to say yes another thing to prove.
Below are the screen shots of my proof along with the detailed scenario.
Simple Example (Assuming sales and produced gelatin equivalent in quality and volume):
March 31st Closing Inventory Valuation: 1,000 tons of gelatin values @ $10.00/Kg => total valuation $10 million.
April production: 500 tons of gelatin @ $8.00 / Kg. ($4 million) 500 tons gelatin sold.
Month-end April Valuation:
1,000 tons O.I. @ $10.00 plus 500 tons @ $8.00 = $10 million + $4 million = $14 million for 1,500 tons of gelatin
=> $9.33 / Kg cost ($14,000,000 / 1,500,000 Kgs). 500 tons sold with COS of $9.33. So closing inventory of 1,000 @ $9.33 = $9.33 million.
May production/sales: Same as April.
Month-end May Valuation:
March 31st 1,000 tons O.I. @ $10.00, plus 500 tons @ $8.00 April production, plus 500 tons May production @$8.00 = $10 million + $4 million + $4 million = $18 million for 2,000 tons of gelatin
=> $9.00 / Kg cost ($18,000,000 / 2,000,000 Kgs). 1,000 tons sold in April and May with COS of $9.00 . So closing inventory of 1,000 @ $9.00 = $9 million.