Unit Cost = updated when you copy a cost from another cost set into Cost Set 1 OR you receive an item from a purchase order or shop order with a price/cost (respectively) that is accumulated on that line  This is your current standard cost in a Standard Costed site or the Weighted Average in a weighted average site.  This is typically a manual action per part.  So if you have the part shown, you need to cost calculate in Cost Set 2, then copy to Cost Set 1 in order to update the unit cost.

Last Purchase Price and Average Purchase Price fields are only updated by running the Calculate Purchase Cost function.  You have to define the parameters for this function and run it once for each version.  You can then use the LPP as an input to update the Estimated Cost which could later become the standard cost.

That is absolutely as simple as I can make it, but it can get much more complex from there depending on part type (manufactured or purchased), structure type (configured or not), work center definition, routings, etc, etc, etc.

Thank you Shawn!  That definitely helps us, we will try different examples in our TEST system to validate.  Thank you again!!  Best regards, Mark

I just noticed the setting for you was Weighted Average, not sure why I overlooked that before.  That means the unit cost is updated each time there is a receipt of the goods for the item from a purchase order or a shop order.  

I’ll add some additional detail I wrote up for our Italian contingent when we put them into the system.  The only difference for you is that you won’t also get an update on the supplier invoice price as the setting of Ignore Invoice Price will stop that secondary update. 

Hope I didn’t send you off in the wrong direction with the standard cost updates - that is only applicable for you in the initial setup of the parts before any receipts are done.  After you do any receipts, the averaging mechanism takes over to maintain the unit cost.

Previous emails:

I’ve went through the entire average costing process including receipts, receipts with different prices than the average (as would be normal) and different prices on the supplier invoice.  I’ve attached the entire worked scenario with examples of 5 receipts and the corresponding invoices at different values.  Plus two shipments in between.

Here are the Purchase Orders and the prices and quantities used for reference, but they are also seen in the transactions attached.

I can confirm the following behavior:

• Average cost is recalculated upon every receipt based on the purchase order price and the average cost of the existing inventory on hand
• Customer order shipments do not affect the average cost at any point
• Average cost is recalculated a second time if the invoiced price is different than the received price with two requirements:
  • The receipt MUST be matched to the invoice (as you would expect)
  • The invoiced value per item must be updated on the matching transaction as part of entering the invoice
• When the average cost is recalculated due to an invoice difference it revalues every transaction from the point of the matching ARRIVAL transaction forward, including any customer order shipments that have occurred from the receipt until the invoice date
• Once inventory reaches zero on hand, the average cost resets on the next receipt to match the purchase order price, at least until the invoice is processed
• The purchase order line never gets updated (nor does it need to be updated) to reflect the price difference, but all of the inventory transactions and vouchers do get updated (meaning purchasing will never have to update a PO between receipt and invoice processing)  IFS will do all the work provided the invoice reflects the price change

One more clarification:

Why do the Inventory Part Unit Cost not match the Accumulated Cost in the Part Cost screen? The example below is a manufactured item so that might be different than what we looked at before since that was purchased.  Shouldn’t they always be the same?

No, they don’t have to be the same, in fact, often will not be.  In a weighted average site, if there are any variances from the initially set standard cost, then the unit cost will fluctuate based on the variation in the cost received for each shop order..

IF,

you have setup a manufactured part with a routing and structure

you have calculated that cost using the cost calculation function in a cost set other than Cost Set 1

you have copied the cost up to Cost Set 1

then this will equal the Total Accumulated for Cost Set 1.

This will be the received value and the unit cost for the part the first time it is made as long as there is no variance.  They will continue to stay in sync as long as no cost changes, no BOM changes, no routing changes occur, but any variation in the next shop order and you will see the unit cost update based on the average of the inventory on hand and current completed shop orders.

Same is true for purchased parts, but then the fluctuation is based only on variations in purchase price and received inventory value (and also the supplier invoice price if you have that turned on to update - your one example was not turned on).