Question

What are the possible reasons for negative unit cost for inventory part ?

  • 24 July 2023
  • 2 replies
  • 267 views
H
Rank
Userlevel 4
Badge +8

Hi Everyone,

I just came across where the unit cost is negative for the inventory part. May I please know what are the possible reasons when the unit cost is appearing negative?

Thanks in advance

BR

BT

2 replies

P
Rank
Userlevel 5
Badge +13

Hi,

I guess you are refering to the Unit Cost shown in Inventory Statistics (ex. Inventory value per period), right?

If so, the reason for negative value is the way this value is calculated. Statistics for a period take last value from end of previous period and accumulates the values in inventory transactions during the period used. So then, it’s considering negative or positive transaction directions to sum or substract values. If a part has been received in stock at a certain cost and then a revaluation has taken place with a higher value, once the parts are delivered (or taken out of stock), they will create negative inventory transactions which higher value than the positive ones. Then, you can finish the period with a negative total cost, and then negative unit cost (calculated dividing total cost by quantity).

Then, consider that Inventory statistics shows the variations during corresponding period, not the actual unit cost of a certain part.

Sometimes the specific case cannot be explained with this previous description. If so, then please open a Support ticket so Support team can investigate it further.

Regards,

Pilar

Upasari
Rank
Userlevel 1
Badge +4

Hi,

The situation to end up with a negative cost has always been there when using Weighted Average and performing cancellations or returns.
This is not a unique issue in IFS but the general behavior in the weighted average calculations.
The common issue here is that when using WA and the customer has very different costs for the same part, they can end up with negative inventory value during the process when a part is returned at a higher PO value than the current inventory cost. If the customer has a wide range of costs for a specific part and they know that they will do cancellation of purchase order receipts or returns to supplier, they must be aware of the consequence of having negative inventory value. If they have this situation often and find it not acceptable, then maybe they shall reconsider the use of WA and use another valuation method instead.
It is true that we cannot issue or move a part with a negative cost. This issue exists for almost all issues and deliveries. For example, Normal Issue, customer order delivers and Material Requisition issue.

The only action you can take now is to correct the cost manually for the quantity that is still in inventory. This can be done on the Inventory Part/Cost/Inventory Value subtab through the RMB Modify Level Cost Details.

Hope this helps.

Regards,

Upasari

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