In this chapter, you will do the following:

• Become familiar with valuation methods that define the costs of stock items
• Process sales documents with stock items that are assigned different valuation methods
• Review the calculated costs of stock items

You may need to assign a particular valuation method to a stock item to make the system track the item’s cost based on how your company currently sells and purchases the item.

You can assign valuation methods and track stock item costs if the Inventory feature is enabled on the Enable/Disable Features (CS100000) form.

In Acumatica ERP, you can assign one of the following valuation methods to a stock item:

• Average: For details, see Item Costs and Valuation Methods: Average Method.
• FIFO (first in, first out): For details, see Item Costs and Valuation Methods: FIFO Method.
• Specific: For details, see Item Costs and Valuation Methods: Specific Method.
• Standard: For details, see Item Costs and Valuation Methods: Standard Method.

You specify the Valuation Method on the General tab of the following forms:

• Item Classes (IN201000): You assign a valuation method to a stock item class, which will be inserted by default for newly created stock items of the class.
• Template Items (IN203000): You assign a valuation method to a template item, which will be inserted by default for newly created matrix items that are stock items or non-stock items.
• Stock Items (IN202500): You assign a valuation method to a particular stock item if you want to override the valuation method of its item class.

You can change an item’s valuation method only if the on-hand quantity of the item in stock is 0.

The calculation of costs for stock items is performed on a per-warehouse basis. When an item is received in a warehouse, its quantity and cost are recorded in a cost layer. In Acumatica ERP, a cost layer is a record of an item’s quantity and cost that is calculated based on the valuation method assigned to this item.

Some companies use multiple locations in warehouses and have the Multiple Warehouse Locations feature enabled on the Enable/Disable Features (CS100000) form. In this case, to calculate an item's cost in a particular warehouse, the system includes the costs of all quantities of the item in all locations.

If you need to track stock item costs only at a particular warehouse location, such as a location where items are stored for a specific project, you can track item cost for each location separately. To do this, you select the Cost Separately check box on the Locations tab of the Warehouses (IN204000) form for the needed location. With this check box selected, the system creates a separate cost layer for a stock item at this location on release of an inventory document. If a quantity of an item is issued from this location, the extended cost will be calculated based on the location-specific cost layers. The item’s quantities and cost in this location are not included in the item's cost in this warehouse.

For each warehouse, on the Warehouses form, you can select either the Average or Last option in the FIFO Default Cost and Average Default Cost boxes. If an item is assigned the FIFO or Average valuation method, respectively, the selected option determines whether the system inserts the average or last unit cost in the Unit Cost column in the following places:

• On the Details tab of the Sales Orders (SO301000) form for each line with the Issue or Receipt operation as follows:
• In a sales order line with the Issue operation, the system uses the populated Unit Cost value for the calculation of the estimated margin amount. When an item is shipped and the inventory issue is released, this item will be issued from a warehouse with the unit cost calculated based on its valuation method.
• In a sales order line with the Receipt operation, the Unit Cost value is populated based on the selected option if no original unit cost has been found in the system. This unit cost will be posted to the Inventory account when the item has been received back in stock.

If the original unit cost has been found in an issue related to the original invoice (if any) specified in the Invoice Nbr. column, the system will use the original unit cost by default.

• On the Physical Inventory Details tab of the Physical Inventory Review (IN305000) form. The populated Unit Cost value for stock items with a positive Total Variance Qty. column value will be posted to the Inventory account on the release of an inventory adjustment.