Understanding Work In Progress and Inventory Valuation
Frames are considered to be Work In Progress (WIP) when they are picked for patient orders. WIP inventory items are not included in a location’s on hand inventory and are not included on the Inventory Valuation Report.
Picking a frame moves it from Inventory On Hand to WIP. Picking a frame does not affect the average cost. Performing a merchandise drop on a frame returns it to Inventory On Hand from WIP. Performing a merchandise drop on a frame affects the average cost only if another inventory transaction that occurred after the frame was picked changed its average cost.
For example, if an office receives a frame at $100 and later receives the same frame at $140, the transactions and resulting inventory value would be:
- Transactions:
Receipt (Office): 1 x $100
Receipt (Office): 1 x $140 - Resulting Inventory Value:
When a frame is picked for an order, the resulting inventory value remains the same:
- Transactions:
Receipt (Office): 1 x $100
Receipt (Office): 1 x $140
Picked for Order (Office): 1 x $120 - Resulting Inventory Value:
When the office receives another frame at $150:
- Transactions:
Receipt (Office): 1 x $100
Receipt (Office): 1 x $140
Picked for Order (Office): 1 x $120
Receipt (Office): 1 x $150 - New Average Cost at Office:
- Resulting Inventory Value:
If a merchandise drop was performed for the frame, the resulting inventory value is the same as it would have been if the frame was not picked for an order:
- Transactions:
Receipt (Office): 1 x $100
Receipt (Office): 1 x $140
Picked for Order (Office): 1 x $120
Receipt (Office): 1 x $150
Merchandise Drop (Office): $120 - New Average Cost at Office:
- Resulting Inventory Value:
Based on the previous example, the inventory transactions for the frame can be viewed in the Inventory Transaction Detail Report:
The inventory value for the frame can be viewed in the Inventory Valuation Report:
