RE: Making the same item at different factories
Consider the simple scenario of repackaging 1 raw material into a finished good.
Example 1: Purchase 10,000 units of Item 123 at .90/unit. Receive into inventory. Enter Supplier Invoice. Purchase another 10,000 units of Item 123 at 1.00/unit. Receive into inventory and enter supplier invoice. Avg cost of Item 123 is .95/unit. Build Item ABS out of Item 123. Receive 20,000 units of ABS and issue 20,00 of 123. In Inventory I will have 20,00 units at .95/unit
Example 2: Purchase 10,000 units of Item 123 at .90, receive into inventory and enter supplier invoice. Now build 10,000 units of Item ABC out of 10,000 units of Item 123. I will have 10,000 units at .90 in inventory. Purchase another 10,00 units of Item 123 at 1.00, receive into inventory and enter supplier invoice. Because I have 0 onhand before receipt and invoice my new std cost of 123 becomes $1.00. If I now update the BOM (Even the location, wkctr or autoissue flag) my cost of ABC becomes $1.00. If I build another 10,000 out of the remaining Item 123 at $1.00 I will end up with 20,000 units at $1.00 in inventory.
Which is correct? In my head I value the inventory .95/unit * 20,000 units.
The timing of the BOM update and work orders has now dictated the value of my inventory on my balance sheet.
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