Average cost adjustments are processed by finding and selecting the item to be adjusted in the Inventory Master Program (FV070S03). The average cost adjustment process only updates the cost of the inventory item in the warehouse locations that are assigned to the same division as the operator processing the adjustment. All warehouse locations which are in the operator division are updated. Therefore processing the item in a single location will cause all locations within the same division to be updated and any location in the correct division can be used for the adjustment.
Once the correct location and item combination have been highlighted in the Inventory Master program, the operator accesses the change average cost option by pressing the Menu key to display the pull-down menu and by then selecting “change average cost” from the Options menu. At this point, the system checks if the operator is allowed to access this option. If the operator is allowed access, the system will display the current cost of the selected item and prompt the operator for the new cost. If the operator is not allowed to access the function, a warning message (“Access Denied”) is displayed and the operator is blocked from completing the transaction. (Please see Technical Notes section of this document for more information about setting up and maintaining the security parameters used by this option).
As the operator enters the new cost for the item and presses the ENTER key, the system verifies that the new cost is not negative (the program will not allow a negative cost to be specified). The program then accepts the new cost and it displays a list of the cost adjustment codes that have been set up in the Generic Code Table used by the program. These codes store descriptive information about the adjustment (depreciation, price variance) and they also store information about the general ledger account that each adjustment type should be charged to (Please see Technical Notes section of this document for more information about setting up and maintaining the generic code table used by this option).
The operator must select a valid adjustment code from the generic code table before the system will process the cost adjustment transaction. If the operator does not select a valid code from the table (or if the table is not set up), the program will not allow them to continue. Once a valid cost adjustment code is selected, the system performs the following steps.
• The system determines which locations are assigned to the same division as the operator making the adjustment. If the current location is not assigned to the same division as the operator division, a warning message is displayed, and the program aborts. If the current location is in the same division as the operator division, the inventory record in that warehouse location and in all other locations in the same division are updated with the new average cost entered by the operator.
• Inventory activity records are created for each item in each location that is adjusted. The inventory activity records store the prior and new cost of the item, the on hand quantity for the item at the time of the adjustment, and the value of the STK (track) flag in the inventory master at the time the adjustment is made. Each cost adjustment results in one inventory activity transaction number with a number of lines equal to the number of locations that was updated.
• A journal entry is created to post the adjustment. The increase or decrease to the inventory value is posted to the inventory control account specified by the item product line. The other side of the journal entry is posted to the account specified in the cost adjustment code selected for the transaction (from the Generic Code table record). The journal entry is posted to the division the inventory locations are assigned to and department 1.
• The journal entry number used to post the cost adjustment (type AC inventory activity record) is written to the inventory activity records. This allows automated audit routines to be used to check the inventory transaction activity against the journal entry activity for the transactions (in case of processing errors).