whoops - change the costing method to Standard Costing, not zero.

I suggest you talk with your CPA. If you purchase an item that is to be expensed out, how do you account for the expense if you set the cost to zero  Normally if you purchase items that are consumables you would use the Material Rec feature of Purchase Order to relieve inventory.

Thank you for your concern regarding GAAP compliance. We're well aware of the ramifications but we need Sage to work a certain way for our industry/business processes. Those items that are consumables have a very quick turn and in the scheme of things are insignificant (you could almost consider them bulk issue or floorstock but that would be more relevant to other industries). Given that Sage doesn't facilitate warehouse-specific costing methods or various other features I've encountered with other ERP systems (I've been an ERP/CRM implementer for well over 20 years across several ERP systems), the best solution is to take those specific SKUs to a zero cost and zero Last Cost, convert those CI_Items to Standard Cost, and then we have a process in place for the purchasing side to manage quantities. So again, the issue for me are the CI_Items that have existing POs and SOs. Sage captures the cost at the line item for those transaction types and I'm not seeing the functionality to update the unit costs on open POs or SOs. The result would be that once the PO is received or an SO is invoiced, the average cost would again recalculate. This is NOT what we're trying to achieve. Yes, I can go through the back door and update those line-level costs on those open transactions but from an implementation consultant point of view, and with no audit reporting, that is not something I would recommend. 

Again, thank you for your recommendation but I'm well-versed on the accounting side of things and those few SKUs would not have a material impact to financial reporting or GAAP.

Physical count to zero, then re-receive the quantities at zero cost.

PO, you're always going to have purchases clearing issues / variances if you receive for $0, but post invoices properly.  Misc Codes for the bulk consumables might be more appropriate, and deal with managing inventory counts another way.

SO, unit costs are not finalized until invoicing... but you may want to use a test company to verify they actually are set to zero when posting after the change.

Hello Kevin,  

In this particular case, there won't be PO variances because the SKU will be entered for a quantity at zero unit price but a Miscellaneous Item Charge will be entered for the total value of the PO (i.e., SKU for 100 units at $0, Misc Charge for $100 - assuming $1.00 each - so the total invoice will be received for $100 and matched to the invoice for $100. I thought I'd conveyed that above. 

Shy of going in the back door and updating the open SO unit costs for lines that include the specific SKUs impacted, it seems it will always be chasing a moving target until I get the Average and Last Cost fields to zero and then change to a zero Standard Cost. I don't see a utility to update SO line costs once assigned to the SO. So I was just reaching out to see if anyone else had encountered this situation and the method they may have used.

Thank you for your insights, Kevin.