AX 2012 | moving average costing method - Part 4

In this part we will discuss production costing with moving average. If you use moving average in production costing, costs can be based on the current costs of raw materials rather than on the cost price that was originally registered for the item master. When the finished good is reported as finished, the cost reflects the estimated product cost calculation that is executed by a release of production orders.

The original cost calculation of the finished good might have happened months ago, and thus it might be outdated. With moving average, the result of a product cost calculation that is executed during the estimation process can be adopted rather than the cost from the original cost calculation of the finished good.



Example: Use current costs in a BOM calculation

In this example, you have a finished product, D0007 (Speaker Pro Kit), and a two raw material products, M0023 (Speaker Cable Banana Plugs 24K ), M0024 (Speaker Cable In-wall 50 Ft) Furthermore, the following details apply:

• the three products are calculated by moving average.
• The D0007 consumes 1 piece of M0023  raw material and 1 piece of M0024  raw material.
• A bill of materials (BOM) calculation has been activated with a unit cost of 10.00 for each piece of raw material.

You create a production order for product D0007 , and you buy 1 new piece of each raw material M0023 ,M0024  for the production order at a price of 20.00 for each item item. which is higher than the cost that is activated in the product (5.25 for M0023 and 19.07 for M0024). During the estimation process of the production order, the cost price of 20.00 is applied, and this is the cost price that is included when you report the product as finished.

To see this example in action please follow the steps below: 

1- First make sure the  three products are calculated by moving average.

2- Check the row material cost for item M0023 in the released item form

3- Check the row material cost for item M0024 in the released item form

4- Make sure that the three products don't have quantity on hand.  

5- now go to  Inventory and warehouse management > Journals > Inventory adjustment, and then create a new line.

6- Select product M0023, M0024  ,select the site, warehouse then  enter 1in the Quantity field and 20.00 in the Cost price field,for each item then post the journal.

7- Go to Production control > Production orders > All production orders. and then create a production order for product D0007.( make sure to select the warehouse. i forgot to do it before the screen shoot)

8- From the All production orders form, start a production of D0007, click Estimate to run an estimation of the BOM, and then click OK.

9- In the Start form, on the General tab, select Always in both the Automatic route consumption and the Automatic BOM consumption fields, and then click OK.

10- In the All production orders form select the production order then click Report as finished, and then click OK.

11- On the View tab, Click the calculate price notice that the adjusted cost of 20.00 per unit has been applied for consumption of each of the two pieces of raw material.