Na2009 enus inc_in

MICROSOFT DYNAMICS NAV 2009

COURSE 50225: INVENTORY COSTING

INSTRUCTOR NOTES

Last Revision: June 2009

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Timeline Chart

** Intended for Instructor Preparation Only ** Page 1

Timeline 2

Start Session 1 3

Introduction 4

Chapter 1: Inventory Costing Overview 5

Chapter 2: Inventory Costing Principles 7

Chapter 3: Inventory Costing Functionality 9

Start Session 2 13

Chapter 4: Inventory Valuation Functionality 14

Chapter 5: Setting Up Inventory Costing 17

Appendices 19

Inventory Costing in Microsoft Dynamics NAV 2009

Page 2 ** Intended for Instructor Preparation Only **

Timeline

Total Class Presentation: 8 hours

Session Chapter Description Minutes to

Complete Lesson

Page

Number

1 Introduction 10 4

Chapter 1: Inventory Costing Overview 30 5

Chapter 2: Inventory Costing Principles 40 7

Chapter 3: Inventory Costing Functionality 140 9

2 Chapter 4: Inventory Valuation Functionality 140 14

Chapter 5: Setting Up Inventory Costing 30 17

Appendices 0 19

Instructor Notes


START SESSION 1

Timeline

Presentation: 4 hours

Required Materials

Microsoft Dynamics® NAV 2009 Inventory Costing slide deck

Inventory Costing course training manual

Opening Section

Display the course title slide (slide 1) as trainees come into the room.

When the audience has settled, display slide 2 and then introduce yourself.

Announce the schedule of the training. Point out that the training course is split

into two sessions.

Announce the location of relevant facilities (cafeteria, restrooms, and so on).



INTRODUCTION

Chapter Overview

The goals of this chapter are to:

Introduce students to the Microsoft Dynamics NAV 2009 Inventory

Costing course.

Provide understanding of course objectives.

Timeline

Presentation: 10 minutes

How to Teach this Chapter

Display slide 3: Course Description

Name the audience and the goal of the course.

Display slide 4: Course Objectives

Review the course objectives.

Display slide 5: Course Outline

Review the course outline.

Explain the use of demonstration data in the course and note that the examples in

each chapter build upon one another, so that it is important to use the same

database throughout the course.

Display slide 6

Have participants list and give their top objectives and expectations for the

course.

Display slide 7: Session 1 Outline

Briefly give an overview for the first session.

Instructor Notes


CHAPTER 1: INVENTORY COSTING OVERVIEW

Chapter Overview


Understand the basic concepts behind calculation of inventory value.

Understand the relationship of capitalized and non-capitalized costs.

Understand the valuation of cost objects in relation to their direct and

indirect costs.

Understand the cost flow assumptions that support the various

costing methods.

Timeline



Overview, Objectives

Display slide 8

Briefly explain the objectives of the chapter.

Inventory Costs

Display slide 9: Base Equation

Explain the basic inventory accounting equation given in the manual and used

throughout the course, using the slide to illustrate the simple logic of the

equation.

Display slide 10: Cost Classification

Explain the difference between capitalized and non-capitalized costs. You may

want to use examples to illustrate the definitions given in the manual. You could

use the example of a manufacturing company, where the cost of materials and

equipment are capitalized costs and accountant salaries are non-capitalized costs.

You can then go on to explain the difference between capitalized inventoriable

costs and capitalized non-inventoriable costs. To bring the various terms into

perspective, refer to the diagram in the manual and apply the examples you have

given in class to the diagram.

Display slide 11: Perpetual Inventory Method

Note that most companies use the so-called perpetual inventory method. Explain

how the method modifies the base inventory equation you have given earlier.



Inventory Accounting

Display slide 12: Bases of Inventory Valuation

Briefly explain the different possible bases for inventory valuation, displaying

each part of the slide to help explain each valuation base.

Display slide 13: Cost Object and Cost Assignment

Explain the concept of the cost object and the direct and indirect costs that can be

associated with cost objects. Use the examples from the manual and refer to the

diagram in the manual.

Display slide 14: Acquisition Cost Formula

Explain the elements that make up the cost of inventory acquisition.

After talking about inventory acquisition, move on to explain how the cost from

acquisitions must then flow to the goods that go out of inventory.

Display slide 15: Accounting for Inventory

State that the cost of goods sold is the unknown factor in the calculation of

ending inventory value. Explain that costs are assigned to these goods using a

cost flow assumption.

Use the remaining cost flow assumption slides (16, 17, and 18) to illustrate how

the different methods work and how they affect the value of ending inventory.

Use the scenario at the end of the chapter as a group discussion. You might

discuss the scenario as a class, or, if time allows, you might divide the class into

groups to discuss the scenario.

Instructor Notes


CHAPTER 2: INVENTORY COSTING PRINCIPLES

Chapter Overview


Understand how the program records quantity and value changes in

entries.

Understand the different types of information that are recorded in

item ledger entries and value entries.

Understand how inventory values are posted in the general ledger.

Understand the concept of inventory periods.

Timeline




Display slide 19


Accounting for Inventory

Explain the general concept that there are two stages of posting in Microsoft

Dynamics NAV 2009 for recording the costs associated with inventory.

Display slide 20: Determining the Value of Inventory

Explain the two stages of inventory posting flow.

Display slide 21: Accounting for Inventory

Use the slide to show how the base inventory equation can be presented in

practical terms.

Explain that there are two kinds of inventory posting in the program – value and

quantity. Use the corresponding slides (22 and 23) to list the costs that are

included in each kind.

Note that one or more value entries may relate to a single item ledger entry.

Display slide 24: Inventory Posting Flow

Explain the relationship of different entries created in the program. Point out that

the entries cannot be deleted, so undoing transactions is performed through

creating a balancing document.



Display slide 25: Inventory Periods

Explain the basic definition of inventory periods, using the first part of the slide.

Note that inventory periods align with, but do not strictly depend on accounting

periods.

Explain the conditions of closing an inventory period, using the second and third

parts of the slide.

Describe how inventory periods can be reopened to help the user post inventory

transactions, using the two last parts of the slide. Again, point out that an

inventory period can be reopened without affecting the corresponding closed

accounting period.

Instructor Notes


CHAPTER 3: INVENTORY COSTING FUNCTIONALITY

Chapter Overview


Understand the assignment of costs to acquisitions, including unit

cost calculation.

Understand the flow of costs from purchases to sales for the various

costing methods.

Understand how cost flow for transfers and returns is handled.

Understand the purpose and functioning of the inventory adjustment

batch job.

Understand how and why the program creates rounding value

entries.

Timeline




Display slide 26


Explain how the equation that is used in a previous chapter for determining

acquisition cost is implemented in Microsoft Dynamics NAV 2009.

Inventory Acquisition

Display slide 27: Unit Cost Calculation

Explain how the unit cost on purchase and sales lines is retrieved by Microsoft

Dynamics NAV 2009 depending on the item’s costing method and how that cost

incorporates additional acquisition costs. Use the diagrams in the manual and the

unit cost calculation slide to illustrate how the values are passed to the lines.

Display slide 28: Unit Cost Posting

Briefly remind the participants of the entries the program creates when posting an

acquisition and go through the abstract example in the manual.

With this background, the participants should then do the next three

demonstrations alone to see for themselves how the entries are created and

accessed in the program. Before beginning the demonstrations, draw the

participants’ attention to the note that precedes the demonstrations. This note



gives some hints for setting up the vendor and purchases setup so that the

demonstrations run more smoothly.

Cost of Goods Sold

Briefly review what the cost of goods sold is and how it flows from the cost of

the acquired goods.

Display slide 29: Linking Inventory Increases and Decreases

Explain that the cost flow assumption determines how the link between increases

and decreases is made. This forms the background for moving the discussion to

costing methods.

Display slide 30: Costing Methods

Define what the costing method is.

Explain the costing methods using the corresponding slides (31 through 35) to

illustrate how each method handles the situations with the same data differently.

It is also important to emphasize that outbound transactions are initially posted

with either the standard cost or the item’s average cost (from the unit cost on the

item card) and that these costs are properly adjusted according to the cost flow

assumption when the user runs the Adjust Cost Item Entries batch job.

Display slide 36: Application of Entries

Explain how the program performs application of entries. Have the students open

the item application entries as described in the manual.

Display slide 37: Fixed Application

Explain fixed application, going through the example in the manual, and then

have the participants go through the demonstration of correcting a wrong posting

on their own.

Briefly explain what the purpose of using the application worksheet is and have

the students go through the demonstration in the manual.

Display slide 38: Average Cost Calculation

Explain the average cost calculation and briefly explain the concept of the

valuation date. Note the two inventory setup settings that influence average cost

calculation.

Display slide 39: Average Cost Calculation

Explain how the program calculates the average cost. Go through the example in

the manual to show how different average cost periods influence average cost

calculation for the same transaction data.

Tell the participants to read through the table in the manual that explains how the

program assigns the valuation date to different transactions.

Explain the usage of the Average Cost Calc. Overview window.

Have the students go through the valuation date demonstrations that illustrate

how the program sets valuation dates for various transactions.

Instructor Notes


Display slide 40: Non-inventoriable Costs

After the participants have finished with the demonstrations, briefly explain how

the program handles non-inventoriable costs with item charges.

Display slide 41: Cost Shares Breakdown

Review the functions of the Cost Shares Breakdown report. Have the students

run the report to view the layout of costs in the demonstration database.

Inventory Transfers and Returns

Display slide 42: Inventory Transfers

Explain how item transfers are valued, showing the slide that summarizes the

cost flow for transfers. Explain the mechanism called transfer application.

Go through the example in the manual to see how the cost flows from an

inventory increase to the transfer shipment and then to the transfer receipt.

Display slide 43: Inventory Returns

Explain the cost flow of returns and the mechanism called exact cost reversal.

Note that the program reverses costs based on posted invoices. Emphasize the

fact that, to exactly reverse the costs, particularly with average cost items, the

users must use fixed application to tie the return to the original order.

Explain how exact cost reversal is performed in the program and have the

students go through the demonstration in the manual.

Inventory Adjustment

Display slide 44: Inventory Adjustment

List the reasons why costs in the program may need to be adjusted.

Display slide 45: Inventory Adjustment

Describe the ways of adjusting inventory costs in the program. Explain what the

inventory adjustment batch job (Adjust Cost Item Entries batch job) is and why

it is important. Highlight the main functions of the batch job.

Emphasize the role of the batch job in updating the unit cost of the item card and

that it is recommended to run the batch job daily during non-working hours.

Talk about how the batch job works by processing value entries that have not

been adjusted.

Explain how automatic cost adjustment can be enabled in the program. Note that

its results are exactly the same as those of the adjustment batch job.

Briefly explain how cost adjustment influences sales statistics, using the example

in the manual.

Allow the students to go through the next three demonstrations to see for

themselves how the adjustment batch job changes the cost of transactions.



Rounding

Display slide 46: Rounding

Rounding entries are probably best explained by example, although you should

first explain that the program occasionally generates value entries with the entry

type of “Rounding” whenever there is a discrepancy between the cost of an

increase and its corresponding decrease. Briefly go over the example given in the

manual and then allow the participants to go through the demonstration in the

manual by themselves.

Session 1 Summary

Summarize the material that you went through during the first session, using

slides 47 through 49.

Display slide 50: Session 1 Summary

Offer the students to ask questions. Go back to the respective slides of the

presentation, if necessary.

Announce when and where the next session will take place.


Offer the students to answer the Test Your Knowledge questions after chapters 1,

2, and 3 of the manual. Provide assistance if required.

End the session.

Instructor Notes


START SESSION 2

Timeline

Presentation: 4 hours

Opening Section

Display the course title slide (slide 52) as students come into the room.

When the audience has settled, introduce yourself.

Announce the schedule of the training.

Announce the location of relevant facilities (cafeteria, restrooms, and so on).

Display slide 53: Session 2 Outline

Briefly explain the overview for the second session.



CHAPTER 4: INVENTORY VALUATION FUNCTIONALITY

Chapter Overview


Understand how inventory value is calculated in Microsoft

Dynamics NAV 2009.

Post inventory value from value entries to the accounts in the general

ledger.

Understand how the program handles expected costs, both in normal

posting flow and in posting to the general ledger.

Revalue inventory items using the revaluation journal.

Perform a physical inventory.

Timeline



Objectives, Overview

Display slide 54

Briefly explain the objectives for this chapter.

Inventory Valuation

Display slide 55: Inventory Valuation

List the types of costs that correspond to value entries that comprise the value of

inventory.

Display slide 56: Inventory Valuation Report

Explain how the program calculates total inventory value in the Inventory

Valuation report, using the amounts stored in the value entries. Show the

inventory valuation slide to highlight the different aspects of the report. Use the

slide and example in the manual to explain how the program uses the dates as a

filter to generate the inventory value on the date specified by the user.

Allow the participants to go through the accompanying demonstration by

themselves.

Instructor Notes


Posting Inventory Costs to the General Ledger

Display slide 57: Posting inventory Costs to G/L

Explain how the program posts costs from the value entries to the general ledger

and let the participants go through the tables in the manual to see how the

accounts that are set up in the general ledger are used for inventory costs.

If requested, guide the students to Appendix A to view the full list of G/L

accounts that the inventory costs are posted to.

Display slide 58: The Post Inventory Costs to G/L Batch Job

Explain the processing algorithm of the batch job.

Allow the participants to go through the demonstration by themselves.

Explain how posting in a closed accounting period can be accomplished in the

program only by temporarily allowing the user post transactions within the

needed date range.

Display slide 59: Posting Expected Inventory Value

Define expected costs for the participants and use the slide to cover the main

points of how expected costs are handled in the program.

Allow the participants to go through the accompanying demonstration by

themselves.

Display slide 60: Tracing G/L Entries

Explain how general ledger entries can be traced down to underlying value and

item ledger entries in the program.

Go through the first demonstration with the trainees: run the Inventory – G/L

Reconciliation tool and describe its main features.

Explain how the program creates links between value and general ledger entries

using an internal table.

Allow the participants to go through the second demonstration by themselves.

Inventory Revaluation

Display slide 61: Inventory Revaluation

Briefly explain the concept of revaluation. Define what revaluable quantity is,

using the slide.

Explain the ways of performing inventory revaluation in the program.

Talk about the table showing which outbound entries are affected by a

revaluation.

Briefly step through the example for automatically calculating inventory value,

emphasizing the fact that the entries must be completely invoiced for the program

to revalue them.

Allow the participants to go through the demonstrations by themselves.



Physical Inventory

Display slide 62: Physical Inventory

The physical inventory section is fairly straightforward, and if the participants

have been through the inventory management training, this will be a review for

them. Briefly explain the physical inventory and then allow the participants to go

through the demonstration by themselves.

Instructor Notes


CHAPTER 5: SETTING UP INVENTORY COSTING

Chapter Overview

The goals of this chapter are to learn to:

Set up the inventory costing options for the company in Microsoft

Dynamics NAV 2009.

Set up individual items to use the correct costing method.

Timeline




Display slide 63

Briefly explain the objectives for this chapter.

Inventory Costing Setup

Display slide 64: Inventory Costing Setup

Show the students how to access the Inventory Periods window.

Go through the general inventory setup as described in the manual. Each of the

three inventory costing options on the inventory setup has been mentioned earlier

in the course. Remind the participants of the implications of each option:

Automatic Cost Posting: Emphasize the fact that, when this option

is set to true, the program generates many more general ledger

entries than when users simply run the Post Inventory Cost to G/L

batch job periodically. This may have implications for the database

size required by the company and for the performance of the system

during posting.

Expected Cost Posting to G/L: Mention that this option also has an

impact on database size, since it means that general ledger entries are

created for interim accounts. The number of general ledger entries

will substantially increase when this option is used in combination

with Automatic Cost Posting, and there also is an increased risk of

slower performance.

Average Cost Calc. Type: Emphasize that the decision for this field

must be made carefully, both because of its impact on the average

cost of items and also because, once the company has started making

transactions in the database, if a user changes the value in this field,

then all entries for items that use the Average costing method must



be adjusted using the Adjust Cost Item Entries batch job. Depending

on the size of the database, this can take several hours.

Average Cost Period: Note that this setting changes the way the

program calculates the cost of average-valued items. List the

limitations that apply to changing this setting.

Explain the inventory costing item setup, showing the options available for the

costing method. Since the costing methods are covered in depth in earlier

chapters, this does not have to be a lengthy explanation. However, you can

emphasize the importance of selecting the correct costing method when setting

up the item the first time.

Session 2 Summary

Summarize the material that you went through during the second session, using

slides 65and 66.


Offer the students to ask questions. Go back to the respective slides of the

presentation, if necessary.


Offer the students to answer the Test Your Knowledge questions after chapters 4

and 5 of the manual. Provide assistance if required.

Display slide 68: Course Summary

Briefly list the main highlights of the Inventory Costing course.

End the session.

Instructor Notes


APPENDICES

Appendix A contains the table entitled “Controlling G/L Accounts Posted To”

that serves as an addition to the“Posting Inventory Costs to the General Ledger”

section of chapter 4.

Timeline


Na2009 enus inc_in

Technology

inventory costs

inventory costing overview30

inventory costing principles40

course title slide slide

inventory costing30

objectives display slide

training course

course objectivesreview