E1: 41: Weighted Average Cost (P4105) Grows Smaller with Each New Shipment (P4205) from the Warehouse (Doc ID 2902897.1)

Last updated on NOVEMBER 23, 2022

Applies to:

Symptoms

A client currently uses Standard Cost (07) as their Sales Inventory Cost which is set to 74.1848. They purchase and receive a particular item for 69.047 but notice that Weighted Average Cost is reduced after new Ship Confirm (P4205) transactions. There are 308 records in the Item Ledger that were created between July 2021 and August 2022. Currently the Weighted Average Cost (02) record in the Item Cost Ledger (P4105) is 32.6693. If items are always purchased for 69.047, why did the Weighted Average Cost (02) record go down after new transactions were entered?

Steps to Reproduce: 

1. Use Item Master (P4101) to setup a new item (4105-07) with Purchase Price Level 2 (Use Supplier Catalog at Item Branch Level for Purchase Price).
2. Assign Supplier Number 594344 to the Item 4105-07 in Branch 30.
3. Use Supplier Catalog (P41061) to create a purchase price of 69.0470 for Supplier 594344, Item 4105-07 and Branch 30.
4. In Item Cost Ledger (P4105) Standard Cost (07) is selected for Sales/Inventory Cost which is set to 74.1848.
5. Create a purchase order for 1,000 EA of the item. The cost (purchase price) defaults from the Supplier Catalog as 69.0470. Extended Cost is 69,047.00.
6. Receive the purchase order for 1,000 EA of the item at 69.0470 per item
   1. Item Ledger (P4111) shows 1,000 units of item were added to inventory at a unit cost of 69.0470 and Extended Cost of 69,047.00 and a Standard Cost Variance entry for 0 units of 5,137.80 is also entered.
   2. Check Item Cost (P4105). A Weighted Average Cost (02) record for 69.0470 was calculated and inserted into the table.
7. Now create a Sales Order (P4210) for 100 units. The cost per unit of 74.1848 defaults from the Standard Cost setup for Sales/Inventory Cost in the Item Cost Ledger (P4105).
8. Ship Confirm (P4205) the Sales Order.
   1. Item Ledger (P4111) shows 100 items subtracted from inventory at the higher Standard Cost of 74.1848 per unit. When the items were added they were added at the lower Supplier’s Price of 69.0470.
   2. So the cost of inventory leaving the warehouse was higher than the cost of those units when they came into the warehouse.
   3. Checking the Item Cost (P4105) the Weighted Average Cost has been recalculated to a unit cost of 68.4761 that is lower than the supplier’s price of 69.0470.
9. Now let’s sell 500 more items. The cost per unit of 74.1848 defaults from the Standard Cost setup for Sales/Inventory Cost in the Item Cost Ledger (P4105).
10. Ship Confirm (P4205) the Sales Order.
    1. Item Ledger (P4111) shows 500 more items subtracted from inventory at the higher Standard Cost of 74.1848 per unit.
    2. Checking the Item Cost (P4105) the Weighted Average Cost has been recalculated to a unit cost of 61.3402 that is much lower than the supplier’s price of 69.0470.

Cause

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