What happens when I select different options for processing negative inventory quantities?

The options for processing inventory quantities when the transaction quantity exceeds the quantity on hand are:

• Always: applies cost for the entire transaction, including negative balances. The cost processor costs the transaction as follows:

  • If the cost method is perpetual average cost, it applies the average cost for the entire transaction quantity.

  • If the cost method is actual cost, it applies the FIFO layer cost for the entire transaction quantity, and then processes a cost variance when the next receipt replenishes inventory.

• To Zero: applies cost only for quantity on hand, and holds the remaining shortfall until inventory is replenished.

• Never: does not apply cost for the transaction until quantity is sufficient to cover the entire transaction.