The new feature 'Recalculation for Weighted Average Cost including Physical Transaction' in D365FO

In D365FO version 10.0.41 a new preview feature is added named 'Recalculation for Weighted Average Cost including Physical Transaction'.

This feature brings an addition to the 'Post physical value' field in the 'Item model group', only for weighted average value models. And because I have a lot of articles about these Item model group settings, even when this feature is small I thought it would be good to share about this new feature that contains a new field in the 'Item model group'.

When you have enabled this feature, in the 'Item model group' for most inventory models you will not see any differences. For example when using FIFO the 'Cost method & cost recognition' fields are still the same:

But when selecting an 'Item model group' with the Inventory model 'Weighted avg.' (Weighted average) or 'Weighted avg. date', a new field is added:

You can only select this field when you have already selected the field 'Include physical value'.

About the concept 'Include physical value' I already wrote an article before so I will not give a extensive explanation here. But summarized this field makes sure that in the running average cost price besides the financial posted inventory transactions also the physical posted inventory transactions are taken into the calculation. That was already possible for weighted average, but only during the month in the running average cost price. In the recalculation or inventory closing only financial transactions where used.

And that's where the new field 'Include physical value in weighted average recalculation' has impact, this makes that in the recalculation also the physical posted transactions are taken into the calculation.

To show the differences with and without this option I have created three Item model groups:

• An Item model group for Weighted average with only the option 'Include physical value' selected.

• An Item model group for Weighted average with both the option 'Include physical value' and the new field 'Include physical value in weighted average recalculation' selected.

• But to show what happens if you don't select any of these options for including physical values I also have created an Item model group without this enabled:

To show the consequences I create also three new released items and on each item I add the Item model group corresponding to the described ones above:

Now for each item I create transactions, based on the same dates, quantities and purchase prices:

1th of the month: purchase of 2 pieces for USD 5,- each, status invoiced

3th of the month: purchase of 2 pieces for USD 7,50 each, status delivered

4th of the month: purchase of 2 pieces for USD 6,- each, status invoiced

5th of the month: selling of 1 piece, status invoiced

During the month, without running an inventory revaluation or inventory closing, the running average cost price used on the sold item is as following:

I explain these values:

WA (running average cost price of USD 5,50): for item WA the field 'Include physical value' on the Item model group is empty. Only financial posted values (column 'Financial date' having a date filled) are calculated into the running average cost price. Which means: 2 X USD 5,- (Cost amount USD 10,-) plus 2 x USD 6,- (Cost amount USD 12,-) = USD 22,-. Financially finished 4 quantities are purchased. USD 22,- / 4 = USD 5,50 as running average cost price.

WAF + WAPVR (running average cost price of USD 6,17): For these items the field 'Include physical value' on the Item model group is selected. This means that both Financial and Physical posted values are calculated into the running average cost price. The formula: 2 x USD 5,- (Cost amount USD 10,-) plus 2 x USD 7,50 (Cost amount USD 15,-, which is visible in the transaction details tab 'Updates') plus 2 x USD 6,- (Cost amount USD 12,-) = USD 37,-. In total 6 quantities are purchased. USD 37,- / 6 = USD 6,17 (rounded) as running average cost price.

Now in the Inventory Management module I run the Recalculation for these three items:

When finished, the (same) item transactions are as following:

What's made different now is the transaction of item WAF. This is the item where the field 'Include physical value' on the Item model group is selected, but not the field 'Include physical value in weighted average recalculation':

So during the running average cost price calculation the physical posted purchase transactions are used. But during recalculation of the inventory value only the financial posted purchase transactions are used for calculating the weighted average. For item WAPVR the running average cost price is still USD 6,17, because here the field 'Include physical value in weighted average recalculation' is also enabled:

And this is the behavior based on the new feature: also in the recalculation this 'physical' transactions are still taken into the calculation and that's why for this item the running average cost price after recalculation also has the value including the purchase on October 3 which is only Physical updated:

By the way, for all items after running the inventory closing, the behavior is the same. Only financial posted transactions will be taken into the calculation of the weighted average. After this inventory closing the definitive cost value for all items is the same, USD 5,50:

This means that the settings regarding 'Include physical value' and the new field 'Include physical value in weighted average recalculation' only have effect during the period before the inventory closing.