The valuation method of an item affects the order in which each type of cost is used in the Sales Order, Purchase Order and Inventory modules.

The Item Costing Hierarchy begins with (for Purchase Order module only):

1. Vendor Price Levels (highest priority):
   • Open Accounts Payable, Main menu, Vendor Maintenance
     • Select or enter a vendor
     • Click the More button to access a drop-down selection of buttons
     • Select Items to access the Vendor Receipt History task window
     • Click the Pricing button to access Vendor Price Level Maintenance
   • Click the Vendor Price List (flashlight icon) button to access the Vendor Price List task window
   • Search to see if there is a price level setting that exists for the specific Vendor that applies to purchases from a specific Product Lineand/or Item Code
   • Review applicable entries and edit (if necessary) or delete as desired, including Quantity Break
2. For situations where Vendor Price Levels are not used:
   • For Standard and Average cost items in Purchase Order Entry, Receipt of Goods Entry, Return of Goods Entry (no purchase order specified), Material Requisition Issue Entry (one-step) and material requisitions entered in Purchase Order Entry, the cost hierarchy specified below:.
     • Standard Valuation – The standard cost from the Inventory master file is used. If the standard cost is zero, the unit cost defaults to the last cost. If the last 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
     • Average Valuation – The warehouse average cost from the Inventory master file is used. If the warehouse average cost is zero, the unit cost defaults to the item average cost. If the item average cost is zero, the unit cost defaults to the last cost. If the last cost is zero, the unit cost defaults to the standard cost.
   • For LIFO/FIFO/Lot/Serial cost items,
     • Vendor Last Cost is used
     • If the Vendor Last Cost is zero, or no vendor is assigned to the item, then the Item Last Cost is used.
     • If the Item Last Cost is zero, then the cost hierarchy specified below for each valuation method is followed.
3. In the Auto Generate Orders Selection window, when selecting ‘Update Unit Cost With’:
   • Standard Default or Last Unit Cost – the Primary Vendor’s last cost is used.
   • Standard Unit Cost – the item’s standard cost is used.
   • Average Unit Cost – the item’s average cost is used.
   • If any of the costs are zero for the above selections, the unit cost used follows the cost hierarchy based on the valuation methods listed below.

Standard Valuation – The standard cost from the Inventory master file is used. If the standard cost is zero, the unit cost defaults to the last cost. If the last 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.

Average Valuation – The warehouse average cost from the Inventory master file is used. If the warehouse average cost is zero, the unit cost defaults to the item average cost. If the item average cost is zero, the unit cost defaults to the last cost. If the last cost is zero, the unit cost defaults to the standard cost.

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.

Notes:

• In the Sales Order module, the determination of what cost to apply is calculated during the Sales Journal update. When using a pricing method that is a Markup Percentage or a Markup Amount and the standard cost is zero, the cost hierarchy is followed to determine the unit price.

In the Inventory Module, the hierarchy determines the cost used in Inventory Transaction Entry for all transaction types.

Thank you so much!