Split Cost Layers

When adding inventory of Actual Cost item (FIFO/LIFO Perpetual), if Dynamics GP cannot evenly allocate costs to the item and remain within the item’s Currency Decimals, it will create separate inventory layers where the average cost of the layers is the correct unit cost.

While this happens with non-lot track inventory, it is particularly visible with lot numbers.

Take this example:

Input: 10kg SEED at $0.02 per kg., for $0.20 total input cost.

Output: 9kg POWDER (Lot# 123) at $0.20 total cost.

The correct unit cost (cost per kg) is $0.022222….

When a LeanMFG Manufacturing Order is posted for this production, Dynamics GP will split the Lot Quantity of POWDER into two receipts (cost layers):

Lot 123, Qty 8 at $0.02 per kg, total cost $0.16

Lot 123, Qty 1 at $0.04 per kg, total cost $0.04

Total Lot Cost = $0.20

This is how Dynamics GP normally handles inventory costing when it cannot divide the total cost evenly over the units.

Split costing layers can be avoided with LeanMFG by using “Manual” cost allocation, reviewing Cost Allocation prior to posting the Outputs, then manually setting the Output Unit Cost.

After posting Inputs, stop to review the cost allocation. Add the posted Input Cost and Non-Inventory Cost. Then divide that total cost by the quantity of the Output item. If the resulting Unit Cost does not fit within the finished good item’s Currency Decimals, you will have a split receipt.

To address a split receipt, change the Cost Allocation method to “Manual”, then manually enter an Output Unit Cost that is as close to the correct Unit Cost as possible. The resulting Extended Cost will either be below or above the Input Costs, which will create a variance.

Also consider enabling the Setup option to “Display Unit Cost Warning”. Before posting the Outputs transaction, LeanMFG will check if the calculated Unit Cost equals the Unit Cost rounded to the Item’s Currency Decimals. If the two do not match, it will display a warning like this:

Note that it is possible for LeanMFG fully allocate the costs while also displaying the Unit Cost warning. This happens because LeanMFG posts the TOTAL COST of the Output(s), and Dynamics GP calculates the Unit Cost during posting.