This idea is a proposal that can significantly improve costing for Items with Costing Method FIFO. Some of my customers frequently experience big adjustments made in the cost of sales by the Cost adjustment procedure. It clutters the trend of profit made in a period and makes controlling the business more difficult. In the next paragraph you will find a description of the root cause and in the last paragraph the proposal.

The "Unit Cost" field is used as cost for a new sales line. These costs must be as close to the actual cost as possible to prevent big cost adjustments by the Cost adjustment procedure that is performed after posting of the sales invoice. At present the "Unit Cost" field of an item is filled with the average value of all value entries for the item that exist in the system regardless of age. Practically it means that after some time the "Unit Cost" will always be significantly lower than the Last Direct Cost.

When new sales lines are created it is most likely that these will be supplied from the latest purchases. Therefore, the Last Direct Cost is certainly a closer estimate for the actual cost than an average unless there is a high quantity of non-moving stock. Because non-moving stock is generally a small part of the inventory this can be ignored. I propose to update the "Unit Cost" field of an item with the value of the Last Direct Cost at all times if the costing method is FIFO.