Cost of Goods Sold

The Cost of Goods Sold option is a process that applies the actual product cost to items on uncosted work orders and shipped or invoiced sales orders based on the costing method of the item. The inventory valuation is adjusted for the work orders that are costed and reduced by the cost assigned to the shipped sales orders. Accounting records are generated based on the cost of goods expense account and inventory account defined in Sales Category and assigned to the item.

Cost of Goods Sold is a process that may be run from the menu. It is usually run as a part of the Close End of Day option, as it could take several minutes to finish. The Work Orders and Sales Orders options run as part of the Close End of Day.

Cost of Goods Sold generates a Cost of Goods Sold Batch reports which lists the lots used by the system to calculate the cost for the items and a list of the cost assigned to each sales order by item. It also includes the items and sales order in which a cost could not be assigned. The Close End of Day process will include two batch reports, the cost of goods batch and an Uncosted Items Batch report which list the items and sales order that could not be costed .

The cost assigned to the item will be based on the costing method assigned to the item:

• F – First in First Out (FIFO). Inventory will be decremented using the oldest lots first and the cost applied to the shipped item will come directly from the lots decremented.
• L – Last in First Out (LIFO). Inventory will be decremented from the newest lots first and the cost applied to the shipped item will come directly from the lots decremented.
• I – Individual lot. The lot cost will come directly from the lots selected.
• W – Weighted average. The cost for the item will be calculated using all non-hold inventory lots for the item. Inventory will be decremented from the oldest lot to the newest lot. The cost applied to the shipped item will be the weighted average cost of all non-hold lots multiplied by the quantity shipped.
• S – Standard. The standard cost is the unit cost entered for the item. Inventory will be decremented from the oldest lot to the newest lot. The cost applied to the shipped item will be the standard cost multiplied by the quantity shipped. A change to the standard cost will adjust the inventory value if there is a balance and the user will be asked for an inventory cost adjustment type . Journal entries and adjustment records will be automatically written.
• U – User defined. User defined costing requires the cost of an item to be entered on a sales order. Inventory will be decremented from the oldest lot to the newest lot. The cost applied to the shipped item will be the user defined cost multiplied by the quantity shipped. The system default is based on the costing method setting found in Item Defaults.

To cost the item, the item must have enough ready lot amount inventory. The cost will be assigned to the sales orders based on the lots available for costing. The lots will be consumed based on the date and time the lot was created . The cost will be assigned to the sales orders based on the date and time the sales order was shipped.If the item has lots on costing hold, the item will not be costed until the hold is released. If the lot needed to be assigned to the sales order is on hold, the sales order will be skipped and costed once the lot is released from hold. The lot may be released from hold by:

• completing the purchase order that is creating the hold lot amount
• changing the payment status on the purchase order from inventory hold to payment hold or ready to pay
• assigning the cost to the uncosted work order.

If the item is a weighted average - unlotted item, the on-hand balance cannot be negative. Costs cannot be assigned to sales orders if the Items has a negative balance.

Security Required : Inventory - Cost of Goods Sold