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How Microsoft Dynamics NAV Calculates the Unit Cost on the Item Card

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From time to time we get the question, “How is the Unit Cost on the Dynamics NAV Item Card calculated?”

It seems like a simple question, but in large part the answer is not well known.

We sometimes describe the Unit Cost on the Item Card as the “weighted average cost of the remaining inventory”.

If we look at the Invoicing Tab on the Dynamics NAV 2013 Item Card, we see that the Unit Cost is 42.80.

Invoicing Tab on the Dynamics NAV 2013 Item Card

Figure 1 – Invoicing Tab on the Dynamics NAV 2013 Item Card

The question is, how did Dynamics NAV calculate that number?

To understand how Microsoft Dynamics NAV calculates Unit Cost, one has to understand NAV’s Item Ledger Entries and NAV’s Value Entries. When an inventory transaction is recorded in NAV, an Item Ledger Entry and an associated Value Entry are automatically entered into the NAV database. The Value Entry reflects the cost of that transaction, whether positive or negative. Additional Value Entries may later be added by adding an Item Charge or the adjust cost program. 

Dynamics NAV calculates the unit cost by finding the Value Entries for the item and then adds up the Cost Amount (Expected) and Cost Amount (Actual) to get the total cost. It then adds up the Item ledger Entry Quantity and then divides the total of the costs by the total of the Item Ledger Entry Quantity to get the Unit Cost.

The Unit Cost is the sum of the cost amounts divided by the total of the Item Ledger Entry Quantity

Figure 2 – The Unit Cost is the sum of the cost amounts divided by the total of the Item Ledger Entry Quantity

If you would like to discuss this or any other Dynamics NAV costing or inventory valuation topics, please contact ArcherPoint.

If you enjoyed this blog, you might like to check out our collection of Development Blogs, as well as our "How To" blogs for practical advice on using Microsoft Dynamics NAV.

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