Wrong Cost used in Shipment


Problem Details:

Goods are received at one cost, and an additional cost for freight is prorated to the items.  However, when an Order and Shipment is processed, the cost of the item is too low.



This is often a case of timing.  If the receipt is posted, then the goods are shipped, and the additional cost is added after the shipment, or a receipt adjustment is posted, the cost on the shipment will not reflect the adjustment or the additional cost. 

For example: If an item is received at $371.00 with a freight charge of $81.02, the total cost of the item is $452.02.  The item is then sold and shipped to a customer for that cost.  When the invoice arrives from the vendor, the cost is different than on the original receipt and by entering the invoice against the receipt, with the new corrected cost, a Receipt Adjustment is posted and the cost of the item on the receipt is changed.  However, if that item is no longer in stock (the item has been sold), then the cost will remain in inventory attached to no item, and the cost associated with the prior shipment will now be incorrect.

Go to Inventory Control / Statistics & Inquirires / Transaction History Inquiry to see all the transactions processed against an item.

Check on the day end number to find the sequence of events as they happened, to identify why a cost may not appear on a shipment as expected, or why there may be a cost left in inventory without any quantity of the item. 

Use IC Adjustments to increase or decrease the cost of an item, and assign it to the COGS account if the item has already been shipped.  While this will not change the cost on the original shipment document, it will allow the cost to be recorded in the GL account for accurate reflection on any financial reports. 

Another example of why costing may be incorrect is if 10 of an item are received, then 3 of them are shipped, then an additional cost is entered and that cost will be prorated against the remaining 7 items, instead of the original 10.  Again - this is an issue of timing.  This causes the cost of the first 3 items to be too low, and the last 7 items to be too high.  Once all items are sold, everything comes out correctly in the end.  However, an IC Adjustment can correct the cost of the remaining 7 and assign the extra cost of the already sold items to the COGS account.  It may be beneficial to estimate the amount of freight (for example) as an additional cost on a receipt, instead of not entering it at all until an invoice is received, to avoid the larger discrpancy in cost of the item.  Then, at the time of invoice entry, the only receipt adjustment posted will be the difference between the estimated and actual cost, instead of the whole amount of the freight charge.



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