Functionality of Average Cost in Microsoft Dynamics GP Inventory


With regard to inventory valuation, there are many with doubts on Average Cost calculation.

The following calculation will be used to calculate the average cost of an item:

(Average Cost x Quantity On hand) + (New Receipt x New Receipt Quantity)/(Quantity On Hand + new receipt quantity)

The Average Cost field will be locked in the Item Maintenance dialog box for Average Perpetual items. To open the Item Maintenance dialog box, click Cards, click Inventory, and then click Item.

The Change Average Cost Utility dialog box lets you enter the correct average cost for each item using the new formula listed in this section. To open the Change Average Cost Utility dialog box, click Utilities, click Inventory, and then click Change Average Cost.

This will print a report that suggests changes that can be made to the General Ledger. This report will display an entry for each item or site, and it will display the Inventory account and the Variance account of the Inventory item. The amounts that are on the report are based on the following quantities for the item:

  • On Hand
  • Damaged
  • In Service
  • InUse
  • Returned

Hope this was helpful.


Mohammed Feradh Zain.

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