Performing Inventory Valuation—Exercises

IMPORTANT
It is extremely important that you set up and work within your own site to maintain your data integrity. If you work within any other site, you will compromise your own exercise data as well as the data of other students. Predictable exercise results require that your data be isolated in your own site.

Basic Data Setup

Inventory Locations

Purpose: The purpose of this exercise is to set up the basic data required for using the main functionality.

Windows:
Inventory Locations

  1. Open the Inventory Locations window and create inventory locations of the following three types: Arrival, Quality Assurance, and Picking.

General exercise for Entering Inventory Locations

Inventory Part

Purpose: The purpose of this exercise is to show you how to create an inventory part for use in the main exercise.

Windows:
Inventory Part

  1. Open the Inventory Part window.
  2. Create four new inventory parts using the part numbers described in the table below (XX should be replaced with your initials). The parts should be of type Purchased part.
  3. Click the Misc Part Info tab and select the correct inventory valuation method using the Inventory Valuation Method list.
Part No. Description Inventory Valuation Method
XX-STD-001 XX - Standard Cost Part

Standard Cost
XX-WA-002 XX - Weighted Average Part

Weighted Average
XX-FIFO-003 XX - FIFO part

FIFO
XX-LIFO-004 XX - LIFO Part

LIFO

General exercise for Inventory Part

Supplier for Purchased Part

Purpose: The purpose of this exercise is to show you how to create a purchased part for use in the main exercise.

Windows:
Supplier for Purchase Part

  1. Open the Supplier for Purchase Part window.
  2. Connect the purchased parts to a supplier.

General Exercise for Supplier for Purchase Part

Sales Part

Purpose: The purpose of this exercise is to show you how to create a sales part for use in the main exercise.

Windows:
Sales Part

  1. Open the Sales Part window.
  2. Create a new sales parts based on the above inventory parts.

General exercise for Sales Part

Main Exercises

Purpose: The purpose of these exercises is to familiarize you with inventory valuation methods.

Windows:
Inventory Part
Inventory Transaction History
Purchase Order
Customer Order

Inventory Valuation Method Standard Cost

Note: Use the standard-cost part for this exercise.

  1. Open the Inventory Part window.
  2. Click the Costs tab.
  3. Enter an estimated material cost for the inventory part.
  4. Create a purchase order with a purchase price different from the cost on the inventory part.
  5. Receive the order.
  6. Open the Inventory Transaction History window. Observe the cost type that has been used.

Inventory Valuation Method Weighted Average

Note: Use the weighted-average part for this exercise.

  1. Create two purchase orders with the same part but with different purchase prices.
  2. Receive the orders one at a time.
  3. Open the Inventory Transaction History window, and check the cost.
  4. Open the Inventory Part window, click the Costs tab, and check the inventory value between and after the receipts. Observe the following; Which cost is used? How is the inventory part value affected?

Inventory Valuation Method FIFO

Note: Use the FIFO part for this exercise.

  1. Create two purchase orders for the same part but with different purchase prices.
  2. Receive the orders one at a time.
  3. Open the Inventory Transaction History window, and check the cost.
  4. Open the Inventory Part window. Right-click and then click Query – FIFO/LIFO. The Fifo/Lifo Analysis window appears.
  5. Check the information in this window between and after the receipts. Observe the following; Which cost is used on the inventory transaction? What information can you see in this window?
  6. Create a customer order so that some, but not all, parts are issued.
  7. Check the cost in the Inventory Transaction History  window, and check the Fifo/Lifo Analysis window. Observe the following; Which cost is used on the inventory transaction made for the delivery? What has happened in the Fifo/Lifo Analysis window?

Inventory Valuation Method LIFO

Note: Use the LIFO part for this exercise.

  1. Create two purchase orders for the same part but with different purchase prices.
  2. Receive the orders one at a time.
  3. Open the  Inventory Transaction History window, and check the cost.
  4. Open the Inventory Part window. Right-click and then click Query – FIFO/LIFO. The  Fifo/Lifo Analysis window appears.
  5. Check the information in this window between and after the receipts. Observe the following; Which cost is used on the inventory transaction? What information can you see in this window?
  6. Create a customer order so that some, but not all, parts are issued.
  7. Check the cost in the  Inventory Transaction History window, and check the Fifo/Lifo Analysis window. Observe the following; Which cost is used on the inventory transaction made for the delivery? What has happened in the Fifo/Lifo Analysis window? How is the result different from that of the previous exercise, when FIFO was used?