Sage 100

v2014 any version.... Customer noticed and I tested on two different generic installations to verify the following: Create a new item in item maintenance, FIFO valuation. Enter a standard cost. Enter a sales order, designate the new item on the line as drop ship. Invoice and update. The Average Cost field in Item Maintenance is populated with the standard cost. Why would the average cost field be populated when the valuation is FIFO?

Drop ships use the cost hierarchy I believe.

I think average cost is always populated for LIFO/FIFO, as it's used when inventory goes negative.

I agree with @ThereseLogeais . The fact that it is a new item says that there is no other cost for it to pull from. It would run down the cost hierarchy list until it found a reasonable price. Keep in mind that the COGS will be posted from the PO receipt

In this case and almost all other cases, the PO is a drop ship. Updating the PO receipt of invoice doesn't affect the average cost (or any costs). The average cost changes only when the SO Invoice is updated. On a drop ship line item on the invoice or So, the user can change the cost. That doesn't seem to make any difference in the average cost calculation. I can only get the average cost to change when I change the standard cost.

So, yes, I am sure @ThereseLogeais is correct... Since there are no other costs available the standard cost is the only option to use for the ave cost calculation. ... and why?... seems the only explanation is as @MarkKotyla mentioned - an ""emergency"" cost to use if there isn't any inventory available.

FIFO/LIFO/Lot/Serial - The VENDOR last cost is used. If there is no vendor last cost, the last cost from the Item Costing file is used. If the last cost is zero, the unit cost defaults to the standard cost. If the standard cost is zero, the unit cost defaults to the warehouse average cost. If the warehouse average cost is zero, the unit cost defaults to the item average cost.

From the KB: AverageCostrepresentstheaveragecostofthestockcurrentlyonhandforanitem.Itiscalculatedandstoredforallitems(notjustthosedefinedwithanAverage Costvaluation). Negativeaveragecostsarenotnormal,butcanexistundercertaincombinationsoftransactions.ItismorelikelytohappenforLIFOorFIFOitemswhen thequantityonhandhasgonenegativeduetosalesbeingprocessedpriortoreceipts. Theaveragecosts(bothoverallandwarehouse)areupdatedeverytimeatransactionisupdatedtoinventory.Itiscalculatedasthenewvalueonhand dividedbythenewquantityonhand.Ifthenewquantityonhandiszero,theaveragecostremainsunchangedsincethereisnoquantitytouseinan averagecostcalculation. Not sure the hierarchy is used for every situation, as I found FIFO tends to use average when going negative, even though item costing file has cost. Maybe it varies by version, but that's been my experience with 2014.

Thank you everyone for the comments. It is an interesting discussion.

If the orders are always drop ship, I don't see how FIFO could work. The costs flow to the SO Invoice through the inventory tiers (IM_ItemCost) but when there is no RoG, there is no tier.

COGS should not be updated on the Drop Ship lines. The average cost is used for reference for COGS for the gross profit on the line since no product is issued.

The orders are not always drop ship. The end user has a few new items that happen to have new invoices that were all drop ship. She looked in item maintenance and saw a value in average cost. She the looked at several other items and saw values in the average cost field. She is asking me how a value could be in the average cost field when all of the items are FIFO. @alanniergarth ""The average cost is used for reference for COGS for the gross profit on the line since no product is issued."" This seems like a good answer to her question.