Understanding Cost Update of an Item with Cost Level 3

During the pick, putaway, and replenishment movement confirmations process, the system updates the item cost based on the cost method set up for the FROM and TO locations. To update the item cost of an item with cost level 3, all the prerequisites specified in this section must be met.

After inventory transfer, costs are copied from the FROM to the TO location if the sales/inventory cost is not set up in the TO location. If the sales/inventory cost is set up in the To location, the costs are not copied to the To location, only the average cost (02) is updated.

The system creates journal entries for the cost update and variances. Variance GL entries are created when there is a difference in the sales/inventory cost of the item between the FROM and TO locations. For example, if the FROM Location has a standard cost set to 8 for the item and the TO location has the standard cost set to 5, then a variance record is created for the item in the Account Ledger File (F0911) table. The sales/inventory cost method should be set to 07 (standard cost) in the TO location for creating variance entries.

See Entering Item Cost Information for more information on assigning cost level and cost method to an item.