How Receiving and Inventory Adjustments Affect Cost Layers in Luminous
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- Step 1: Receiving Inventory and Creating Cost Layers
- Step 2: Viewing Cost Layers for a SKU
- Step 3: FIFO (First-In, First-Out) Logic
- Step 4: How Cost Layers are Affected by Other Actions
- Key Points to Remember
This guide explains how receiving inventory and other adjustments influence cost layers in Luminous. Cost layers are crucial for tracking inventory costs, and they are created and updated based on specific actions like receiving, transfer orders, and assembly orders.
Step 1: Receiving Inventory and Creating Cost Layers
Cost layers are automatically created when a receiving report is generated. Here's how to receive inventory:
- Create a Receiving Report
- Navigate to the Receiving Report page.
- Enter the necessary details, such as who is receiving the inventory (e.g., Josh) and the Purchase Order (PO) number (e.g., PO 269).
- Select the warehouse where the inventory is being received (e.g., Warehouse Main).
- Update Locations
- Bulk select the items and update all to the appropriate location (e.g., Location A1).
- Specify Quantities and Additional Costs
- Enter the quantities being received (e.g., 20 units of each item).
- Add additional costs (e.g., shipping costs of $5,000).
- Submit the Receiving Report
- Once submitted, the inventory will be added to your total inventory, and a new cost layer will be created for the received items.
Step 2: Viewing Cost Layers for a SKU
- Search for the SKU
- Navigate to the Inventory page and search for the specific SKU (e.g., "GB-Blue" for a golf bag).
- Access the Costs Tab
- Click into the SKU to view its details.
- Select the Costs Tab to see all historical cost layers associated with the SKU.
- Understand the Cost Layers
- Review the following details for each cost layer:
- Unit Cost: The cost per unit for that layer.
- Total Cost: The total cost for the layer.
- Initial Quantity: The quantity received in this layer.
- Remaining Quantity: How many units from this layer are still in stock.
- Review the following details for each cost layer:
Step 3: FIFO (First-In, First-Out) Logic
- When inventory is deducted (e.g., due to sales or usage), it starts with the oldest cost layer (FIFO logic).
- Inventory will be deducted from the first cost layer until it is depleted, and then the system will move on to the next cost layer.
Step 4: How Cost Layers are Affected by Other Actions
Cost layers can also be updated or created by:
- Transfer Orders
- When inventory is moved between warehouses, the cost layers transfer with it.
- Assembly Orders
- When raw components are combined to create a finished product:
- The system takes the cost layers of the components.
- A new cost layer is created for the finished product based on the combined costs.
- When raw components are combined to create a finished product:
Key Points to Remember
- Cost Layers are Created on Receipt: Every time inventory is received into Luminous, a new cost layer is generated.
- Actions Impacting Cost Layers: Transfer orders and assembly orders can transfer or create new cost layers.
- Tracking Costs: Use the Costs Tab for any SKU to view detailed cost history.
- FIFO Logic: Cost layers are depleted in the order they were created.
Understanding how cost layers work ensures accurate cost tracking across your inventory and allows you to maintain transparency in inventory adjustments.
Video transcript
Creating a cost layer through a receipt
Hey there. This is going to be a quick tutorial about how receiving and other inventory adjustments affect cost layers in Luminous. First and foremost, let's talk about receiving and the creation of a cost layer through a receipt.
I'm going to create a receiving report and fill out the needed info. I'll say this was received by Josh, and I'm going to receive PO 269 into Warehouse Main. Let's receive both of these items into location A1, so I'll bulk select them and update all to A1. We'll receive 20 of each, and we can see the unit price there.
Then I'm going to add some additional cost. We'll say shipping on this round was extremely expensive, and we were charged $5,000. When I submit, that inventory is added to your totals.
Viewing cost layers on the Costs tab
Now let's search up that golf bag, GB-BLUE. I'll click into it, and you can see that each SKU has a Costs tab, which shows all the different cost layers.
Here I can see all the historical cost layers that have been created, the majority of them from receiving reports. I can see the most recent one, created on December 2nd, along with the unit cost, the total cost, the initial quantity and the remaining quantity.
How FIFO uses cost layers
Based on FIFO logic, as this blue golf bag gets ordered and deducted from inventory, it starts with the first cost layer and deducts until that layer is completely used up, then moves on to the next cost layer.
Other actions that move or create cost layers
It's really important to note that a cost layer is created when a receiving report is generated. Cost layers can also be transferred: when you do a transfer order, the cost layer moves from one warehouse to another. It also happens when you do an assembly order, where you take the cost layers of raw components and add them together, and when the finished product is produced, a new cost layer is created.
So just understand that cost is recognized upon receipt, or when an action in Luminous creates a different layer of inventory, like at a different warehouse, or with an assembly order where new product is added into inventory. And that's about it. Thanks, guys.