Troubleshooting
Problem
The information center topic entitled 'How invoice variances affect the average costs of items' provides an example that only accounts for an absorbed versus unabsorbed scenario. The topic should provide an example that shows how the average cost could go negative in an absorbed scenario, due to an existing balance and a large variance.
Cause
Inadequate documentation.
Diagnosing The Problem
In the 'How invoice variances affect the average costs of items' topic you cannot find information on the conditions that cause an average unit cost to go negative in an absorbed scenario.
Resolving The Problem
The following example will help you to understand the circumstances under which the average cost can go negative:
A user receives a quantity against a PO at a unit cost of 100. The average cost is now 100.
The user issues the complete balance to a work order, so that the balance is zero.
Now the user receives from a different PO for the same item, with a quantity of 1 at a unit cost of .01.
The average cost will now refresh to .01 because there is no previous balance to factor into the average.
If the user then invoices the original PO, but changes its unit cost from 100 to .01 the invoice variance will be large enough to drive the average cost negative.
Upon approving the invoice, a variance transaction will be written and the average cost will be set to -99. This change is to absorb the variance to the balance on hand which in this case is 1.
Related Information
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Document Information
Modified date:
17 June 2018
UID
swg21626192