Returning Perpetual Weighted Average Items to Inventory
This section discusses the cost calculation for items returned to inventory when the items are defined with a deplete cost method of perpetual weighted average. This cost calculation is applied when items are returned to inventory using the following transaction groups:
220 Component Kit: This transaction group is used with the PeopleSoft Manufacturing application to issue kit components from inventory stock to a production ID and also to return kit components to inventory when not used in production.
230 Component Consumption: This transaction group is used with the PeopleSoft Manufacturing application to record components issued from an inventory WIP location to production and also to record components returned to inventory.
231 Work Order Usage: This transaction group is used with the PeopleSoft Maintenance Management application to issue items to a work order in order to maintain or repair an asset. Items returned to inventory from a work order also uses this transaction group.
When a perpetual average item is returned to inventory, the return transaction is costed using the weighted average of the items issued. This return cost is stored in the CM_WGHTAVG_COST table and then used to calculate a new perpetual average for the items in inventory which is stored in the CM_PERPAVG_COST table.
Example of Perpetual Average Returns to Inventory
The following example illustrates how perpetual average items are returned to inventory using the transaction groups 220, 230, and 231. In this example, items are issued to a production ID in PeopleSoft Manufacturing and later returned to inventory stock. The same calculations apply if material is issued to a work order in PeopleSoft Maintenance Management.
|
Step |
Transaction |
Trans Qty |
Unit Cost |
Inventory Qty |
Perpetual Average |
Inv Value |
PID Value |
|---|---|---|---|---|---|---|---|
|
1 |
Putaway in Inventory (020) |
10 units |
10.00 |
10 units |
10.00/unit |
100.00 |
|
|
2 |
Issue to Production ID (230) |
1 |
10.00 |
9 units |
10.00/unit |
90.00 |
10.00 |
|
3 |
Putaway in Inventory (020) |
1 |
15.00 |
10 units |
10.50/unit = (90.00 + 15.00)/10 units |
105.00 = 90.00 + 15.00 |
|
|
4 |
Issue to Production ID (230) |
1 |
10.50 |
9 units |
10.50/unit |
94.50 = 105.00 – 10.50 |
20.50 = 10.00 + 10.50 |
|
5 |
Return to inventory from PID (230) |
1 |
10.25 = (1 x 10.00) + (1 x 10.50) / 2 units |
10 units |
10.475 = (9 x 10.50) + (1 x 10.25) / 10 units |
104.75 |
10.25 |
|
6 |
Return to inventory from PID (230) |
1 |
10.25 |
11 units |
10.4545 = (10 x 10.475) + (1 x 10.25) / 11 units |
115.00 |
In the above example, two items are issued to the production ID at different perpetual average costs. When the items are returned to inventory stock, the Transaction Costing process determines the weighted average of the items issued to the production ID and uses this weighted average to cost the return transaction. To keep inventory costs synchronized with the general ledger inventory balance, the Create Accounting Lines process generates an accounting entry to debit the inventory account and credit the production ID account.