To use purchase orders with item requirements, you must set the Create Item requirements option to Yes in Project management & accounting parameters.
- Go to Project management and accounting > Setup > Project management & accounting parameters.
- On the General tab, set the Create Item requirements option to Yes.
- Set the Item consumption option to Yes.
When a purchase order is created by using the Item requirements feature, Microsoft Dynamics 365 Finance generates the project item requirements. Each purchase order line has a direct relationship with project item requirement created for purchase order line, and both lines are linked to each other. Any changes to the purchase order have a direct impact on the project item requirements and cause them to be updated.
For the item requirements, the system shows the unit price for purchase orders as an item cost price after the discount that applies to purchase order lines has been deducted. The item requirement cost price doesn't include the miscellaneous charges that are applied on the purchase order line.
If the Item consumption option is set to Yes in Project management & accounting parameters, item requirements are automatically posted when a purchase order packing slip is posted. If the option is set to No, you receive the following message: "Do you want to consume the material?" If the option is set to No, you can also manually post the item requirements.
The system posts and generates the project cost on either the purchase order unit price or the weighted average. If the Include physical price option is set to Yes for the item model group of the item, the system posts the project cost together with purchase order unit price to the purchase order packing slip. Otherwise, the system generates the project transactions by using the Weighted average inventory costing method.
After the purchase order invoice is posted, if any changes such as additional discounts or miscellaneous changes (if they are charges of the Debit, inventory type) are applied on the purchase order lines, the inventory recalculation process is required to update the project cost. The inventory recalculation process is also required if the Include physical price option is set to No for the item model group. This rule is applicable to all items that have different inventory costing methods, including FIFO, LIFO, Weighted average, and Standard costing.
Example scenario
The following illustration shows a purchase order where some items use the FIFO costing method and others use the Weighted average costing method. Miscellaneous charges are applied on the purchase order. The system has generated the item requirements for each purchase order line.
The following illustration shows the project posted transactions after purchase order product receipt. For all items except WAvgPP, the project cost is generated by using the Weighted average inventory costing method. For the item model group of item WAvgPP, the Include physical value option is set to Yes.
The following illustration shows the project posted transactions after the Inventory recalculation process is run. The Inventory recalculation process performs the adjustment transactions for the project subledger, based on the vendor invoice amount.
