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Costing Issue in Microsoft Dynamics NAV

ArcherPoint’s technical staff pose questions, find answers, and share new discoveries about Microsoft Dynamics NAV

Hotfix Available from Microsoft

I was surprised to find this major error in one of our client’s Microsoft Dynamics NAV instance. It came about when they converted an Item from produced to purchased. They changed the replenishment system field from Prod. Order to Purchased. They had left the BOM and routing attached in the BOM and Routing fields on the Item Card in case they ever needed to produce the items in the future.

This corrupted the standard cost values in the Single and Multilevel cost fields on the Item Card. It would leave the Routing cost information intact. Since the standard cost of an item is the sum of the cost fields, the material cost for the purchased item was backward calculated and left with a much smaller value than what they were actually paying the vendor for it.

Of course, that then created costing issues since whenever they posted a purchase invoice, it would go out and see that the Vendor invoice did not match the lowered material cost field, and would generate an unfavorable material cost variance. But because it was a purchased item, it did not create Labor and Overhead variances.

I confirmed this behavior in demo databases from 5.0-2015 (I didn't have a 2016 database at that time). I presented this issue to Microsoft, and they acknowledged this was how it worked, and they felt that this was correct. There was a manual work around, as long as you blanked the routing field out on the item card, it would clear the routing cost information, which corrected the costing problem.

After bringing this to their attention, Microsoft agreed that they couldn't let NAV carry the wrong Material Cost on the item card.  At a minimum, a change was needed that would fix it so that you couldn't change the replenishment system field unless you cleared the routing, so that you never had wrong cost elements.

After some discussions between the product team, they agreed to fix this issue. They provided a fix that would clear the routing cost information if you set the replenishment from Prod. Order to Purchase.

Please everyone be aware of this significant costing issue. Without this hot fix, NAV does not handle costing correctly if you change from produced to purchase and have not blanked out the Routing Code on the item card!

Contact your partner or ArcherPoint to get this hotfix installed.

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