Serial Numbers and Batches:

Serial and Batch Valuation

SAP Business One Version 9.3

PUBLIC

PUBLIC

Welcome to the topic on the serial and batch valuation method.

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 Objectives

At the end of this topic, you will be able to:

▪ Define the settings for serial/batch valuation

▪ Track costs using the serial/batch valuation method

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After completing this topic, you will be able to:

− Define the settings for serial/batch valuation
− Track costs using the serial/batch valuation method
 Serial/Batch Valuation Method

In addition to 3 main valuation methods:

Serial / Batch Valuation Method

▪ Available only for serial numbered and batch-

managed items
▪ Tracks actual costs on inbound transactions and
uses those amounts for outbound transaction
costs
▪ Allows you to calculate profitability for a specific
serial number or individual item in a batch

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In this course topic, we introduce the serial/batch valuation method.

In the previous course topic, you learned about the three valuation methods that are available
for any item in SAP Business One: moving average, FIFO (first in, first out) and standard
costs. In addition, there is a valuation method specifically for managing costs for serial
numbered and batch-managed items. This method allows us to manage the cost of an item
at the serial or batch number level.
There are two main benefits to this valuation method. The cost used for an item in outbound
transactions is the actual inbound cost of that specific serial number or batch. This means
that profitability can be calculated for a specific serial number or an individual item in a
particular batch.
We will look at two business examples that show the advantages of using this new valuation
method.

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 Business Scenario #1 Manufactured Batches

OC Chocolates produces several lines of

chocolate treats.

Managing costs for batches is important in

their business because the cost of
ingredients and labor in producing the
chocolates can vary altering the profit for
each chocolate batch.

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The first business example shows how the serial/batch valuation method improves costing
and reporting on profitability for manufactured branches.
In this example, we look at the company OC Chocolates that produces several lines of
chocolate treats.
Managing costs for batches is important in their business because the cost of ingredients and
labor in producing the chocolates can vary altering the profit for each chocolate batch.
 Costing in the Lifecycle of a Batch

Receipt
Production Order Delivery /
from Production
A/R Invoice

Costs for ingredients and labor are tracked in the production order.
When the chocolate truffles are received from production into inventory, they are
received as a batch. Because of the valuation method, actual costs are tracked for
that batch.
In the delivery, the actual cost from the receipt from production is used as the cost
of sale. This allows OC Chocolates to track the profitability of each batch based on
the actual cost of producing the item.

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OC Chocolates manages the process of manufacturing chocolate truffles in-house with

production orders. Each item is listed with a quantity to produce. Ingredients for the
chocolate are received from inventory into the production order and the costs are tracked in
the production order. Additionally, they track labor costs in the production order as well.

When the chocolate truffles are received from production into inventory, they are received as
a batch. Because of the valuation method, the actual costs are tracked for that batch. The
total cost of the batch is equal to the costs of production. The value of each individual
chocolate truffle is the total cost of the batch divided by the number of items in the batch.

The chocolate truffles are sold to the retail outlets. When the delivery occurs, the actual cost
from the receipt from production is used as the cost of sale. This allows OC Chocolates to
track the profitability of each batch based on the actual cost of producing the item.

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 Business Scenario #2 Reselling Serial Numbered Items

OEC Computers makes and resells electronics.

Many of their products are serialized.

When they buy the products, they immediately begin

tracking them by serial number.

The cost of each piece of equipment is tracked from

the moment it enters the warehouse, through the sale
to the customer and any after-sales support.

Therefore, OEC can easily track the gross profit for

each piece of equipment they sell.

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The second business example shows how the serial/batch valuation method helps manage
costs and track profitability for a business that buys and resells serial numbered items.

OEC Computers resells computers and other electronics. Many of their products are
serialized.

When they buy the products, they immediately begin tracking them by serial number.

The cost of each piece of equipment is tracked from the moment it enters the warehouse,
through the sale to the customer and any after-sales support. Therefore, OEC can easily
track the gross profit for each piece of equipment they sell.
 Costing in the Lifecycle of a Serial Numbered Item

Delivery /
A/R Invoice

Landed
Costs

Items are assigned serial numbers when they are received on a GRPO.
Each serial number’s individual cost is tracked by using the serial/batch
valuation method.
A landed costs document tracks additional freight and customs costs.
These costs are automatically added to each serial number.
When items are shipped, the cost used on the delivery document is the
Goods actual inbound cost of the specific serial numbers sold. Profitability can
Receipt PO be calculated for a specific serial number.

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OEC Computers begins the process by purchasing electronics on purchase orders. The
items are assigned serial numbers when they are received on a goods receipt PO and the
each serial number’s individual cost is tracked by using the serial/batch valuation method.
Each serial number is automatically assigned the cost from the goods receipt PO.
Since OEC Computers buys some of their serial numbered items from foreign suppliers, a
landed costs document is used to track additional freight and customs costs. The landed
costs document is based on the goods receipt PO which contains the serial numbered items.
The landed costs are automatically added onto the cost of each individual serial number.
When the items are shipped to customers, the cost used on the delivery document is the
actual inbound cost of the specific serial numbers sold. Therefore profitability can be
calculated for a specific serial number.

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 Settings at the Company Level

Basic Initialization
Required Setting
▪ Use Perpetual Inventory
X Use Perpetual Inventory
▪ Optional Default Setting
▪ Manage Serial and Batch Cost by Serial/Batch
Manage Serial and Batch Cost By
Valuation Method
Item Group Valuation Method
▪ Menu Path Serial/Batch Valuation Group Method
▪ Administration > System Initialization >
Company Details > Basic Initialization tab.

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Just as with all other valuation methods, you must be using perpetual inventory to use the
serial/batch valuation method.

In addition, you also have the option of setting the Serial/Batch Valuation Method as the
default for all batch-managed and serial numbered items. This is not required, but if you are
planning on using this valuation method for all your serial and batch items, it will make the
creation of these items simpler because you will not have to choose a valuation method at
that point.

These settings are found on the Basic Initialization tab of the Company Details window. The
menu path is shown on the graphic.

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 Settings in the Item Master

General
To use the Serial/Batch Valuation Method,
the item master needs the following settings:
Serial and Batch Numbers
On the General tab:
Manage Item by Batches
▪ Set the item to be managed by serial numbers
or batches Management Method On Every Transaction

▪ Choose the management method

On Every Transaction
Inventory Data
On the Inventory Data tab:

▪ Choose the Serial/Batch valuation method

Valuation Method Serial / Batch

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To use the Serial/Batch Valuation Method, the item master needs the following settings:

As always, you need set an item as serial number or batch managed at the item level. This
is done on the General tab.

If you have selected the Serial/Batch Valuation Method as the default for managing serial
and batch cost at the company level, then the management method will automatically be set
to On Every Transaction. This cannot be changed to On Release Only when the valuation
method is set to Serial/Batch.

If you have not selected the Serial/Batch Valuation Method as the default at the company
level, then you will need to choose the Serial/Batch valuation method on each individual item.
This is done on the Inventory tab of the item master.

Remember that it is always possible to change the valuation method for an item as long as
the item has no quantity in stock and is not linked to any open document.

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 Company or Item Level

You want to manage costs

and profitability for individual
serial numbers or batches
All serial and
Yes batch items need No
to be managed by
this method?

Company You prefer to

Yes No
Level set the method
as default
and manage
exceptions?
Note: Serial/Batch valuation
method cannot be set in the Company Item
Item Group. Level Level

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Once you choose to manage costs and profitability for individual serial numbers or batches,
you need to decide whether to set the Serial/Batch valuation method as the default at the
company level or make the setting on each individual item.
Here are some considerations:
In your system, do all serial and batch items need to managed by this method? If there are
no exceptions, then the logical choice is the Company level.
Perhaps most but not all your serial or batch items will use this method. If you prefer to set
the SN/Batch valuation method as the default and manage exceptions at the item level, then
the Company Level is still the preferred choice.
However, if you have fewer serial or batch items managed by this method than other
valuation methods, then it is best to make the setting on each individual item.
Unlike other valuation methods, you cannot set this method as the default at the item group
level because item groups could contain items that are neither serial numbered or batch-
managed.

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 Special Setting for Batches

▪ To ensure that each batch has only one price

and not various prices from multiple receipts,
you can select the checkbox:

X Block Multiple Receipts

for Same Batch

▪ This setting can be made in:

▪ General Settings in the Inventory tab, or
▪ the item master.

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If the same batch is received multiple times, the batch cost will be calculated out of the total
value of all receipts into inventory, from all warehouses. To ensure that each batch has only
one price, you can select the checkbox to block multiple receipts for the same batch. Then
the system will require you use a different batch number for each receipt.
This setting can be made both at the company level and the item level. At the company
level, the checkbox is found in the General Settings under the Inventory tab. On the item
master, this checkbox will appear on the General tab if you have chosen the item to be batch-
managed and valued using the Serial / Batch valuation method.
You can make this setting on the item regardless of whether multiple receipts are blocked at
the company level. Additionally, you can change the setting at any time, even if a batch item
had already had multiple receipts.

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 Effect of Allowing Multiple Receipts

GRPO 1 has a quantity of 10 with a total value of 100.

GRPO 2 has a quantity of 10 with a total value of 300.

Batch 1 after receiving GRPO 1

Batch Qty: 10
Total batch cost: 10
Cost per unit: 10

Batch 1 after receiving GRPO 2

Batch Qty: 20 (10+10) The formula for calculating costs for
Total batch cost: 400 (100+300) multiple shipments to a batch:
Cost per unit: 20 (100+300) / (10+10) = 20 Total Receipt Value
divided by
Total Receipt Quantity

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Let us look at the effect of allowing multiple receipts of the same batch. If you decide to allow multiple
receipts for a batch, then the cost basis for the batch will be revaluated automatically if more items are
received for the same batch with a different price.
Here we see an example of what happens when you receive two shipments with the same batch
number. The first shipment is on GRPO 1 and has a quantity of 10. The total value of the GRPO is
100, so the cost per item is 10. Later a shipment is received on GRPO 2 with another 10, but this time
the total value of the GRPO is 300, so the cost per item is 30. As expected when the batch is created
with the first GRPO, we see a batch quantity of 10 with a cost per unit of 10 and the total cost for the
batch is 100.
When the second GRPO is received, the quantity of the batch is increased from 10 to 20. Since the
second 10 are received as another shipment of the same batch with a different per unit cost, this
triggers a cost recalculation. The total receipt value of the first shipment (100) is added together with
the total receipt value of the second shipment (300) for a total receipt value of 400. This sum is divided
by the total quantity of the two shipments. In this case the first quantity 10 is added to the second
quantity 10 for a total of 20. 400 divided by 20 gives us a cost per unit basis of 20.
This type of calculation is done only if you allow receipt of multiple receipts for the same batch. Serial
numbers are never handled this way because a serial number is unique. Therefore if the same serial
number is received into inventory a second time (after that serial number has been issued from
inventory), the serial number takes the cost price of the second receipt.

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 Costing Report for SN/Batch

The Batches and Serials Inventory Audit Report shows the batches or serial numbers for an item along with
the current cost for each.

Batches and Serials Inventory Audit Report

Item No. Batch Current Cost Date Doc. Quantity Trans Cost Trans Value

A111

101 2.50
5.1.19 SI 1 100 2.50 250
6.1.19 DN 1 50 2.50 -125
8.2.19 RE1 20 2.50 50
102 2.60
103 3.00
B120

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There is a costing report for serial numbers and batches: the Batches and Serials Inventory Audit
Report.

You can view the batches and serial numbers in a list view or in a hierarchical view (as shown in the
graphic).

The report shows the batches or serial numbers for an item along with the current cost for each. The
report shows each transaction that contained the batch or item along with the date of the transaction,
the cost of the item on the transaction and the total value for each item or batch on the transaction.

Here we see a report with two batch-managed items in the hierarchical view. The first item has been
opened to show the three existing batches for that item and the current cost of items within each batch.
The first batch (101) has been opened further to see the transactions that included that batch. The first
transaction was a receipt from production for a batch of 100. The next date a delivery was made for a
quantity of 50 from this batch. A few days later 20 were returned.

Several other fields are also available in this report, including but not limited to: item description,
warehouse, attributes for the batch/serial number, expiration date, posting dates, document row,
currency, G/L account.

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 Costs field in Serial/Batch Windows

Serial Number Details

Cost information included on all Serial/Batch windows:

▪ Serial Numbers Detail window Item Number S1000

Warehouse 01 Status Available
▪ Batch Details window
Mfr. Serial Number 27565629M
▪ Serial Number Management – Update window Serial Number S1000-5727
System No. 15632
▪ Batch Management – Update window Admission Date 08.04.18
Manufacturing Date 02.04.18
Expiration Date
Mfr. Warranty Start 08.04.18
Mfr. Warranty End 07.04.20
Location
Details
Cost 150

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A Costs field has been included on all Serial/Batch windows, including the Details window for
both serial numbers and batches and the Management – Update windows for both serial
numbers and batches.

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 Revaluation

Inventory > Inventory Transactions

> Inventory Revaluation Inventory Revaluation

Number 245 Posting Date 09.02.19

▪ Process is similar to revaluating FIFO items. Revaluation Type Inventory Debit/Credit

▪ Two revaluation types: Item. Whse Increase Acct Decrease Acct

▪ Price Change 1 S111 01 911202 911201
2 …
▪ Inventory Debit/Credit
Filtered by Display Issued SN/Batch
▪ Options to filter based on admission date range, Filter Value
expiration date range, batch or SN. Admission Date Range
Expiry Date Range
▪ Additionally serial numbers can be filtered by lot number,
S/B No. Adm. Date Debit/Credit Total Cost
system number, and manufacturer serial number.
1 20200 08.08.18 10 110
2 20200 08.08.18 11 111
▪ Choose to display issued SNs or batches. 3 …

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It is now possible to revaluate items using the serial/batch valuation method in the inventory
revaluation transaction. The process is similar to that used for FIFO items.
You can revaluate the items by both revaluation types: Price Change and Inventory
Debit/Credit.
You choose the item, then you can add filters to narrow the selection for that item. You can
filter batches and serial numbers by admission date and expiration date. For serialized
items, you can filter by serial number, lot number, system number and manufacturer serial
number. You can choose whether to display serial numbers and batches that are issued.

Once the serial numbers and batches are chosen you can enter the new cost or a debit or
credit, depending on the revaluation type you have chosen.
Since batch cost is managed on the company level, warehouse in inventory revaluation is
used for determine the accounts to be used in the journal entry posting and not for
revaluating the cost of a batch in a selected warehouse.
The offset account to inventory account is the Inventory Increase/Decrease account and not
the stock variance account.

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 Costing Example

Delivery /
A/R Invoice
Landed
Costs

Return

Goods
Receipt
PO Revaluation

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We will take a look at an example of how costs are calculated with the Serial/Batch Valuation
Method.

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 Goods Receipt PO

▪ Five tablets (Item # T100) are received from the vendor on

a Goods Receipt PO totaling 500.

▪ Each tablet gets a serial number and the cost for each is
recorded.

SN# Cost
Journal Entry Details
10001 100

10002 100 JE Debit JE Credit

10003 100 Inventory 500 Allocation 500

10004 100

10005 100

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Five tablets are received from our vendor. Each tablet receives a serial number and the cost
for each is recorded.
The total for the goods receipt PO is 500. The journal entry shows a debit of 500 to inventory
and a credit of 500 to an allocation account.
The cost of 100 is assigned to each serial number.

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 Landed Costs

▪ The vendor is overseas, so we create a landed costs document

to track customs, freight and insurance costs.

▪ Total landed costs are 50 and costs are divided equally.

Therefore the cost of each SN increases by 10 to 110.

SN# Cost

10001 110 Journal Entry Details

10002 110 JE Debit JE Credit

10003 110 Inventory 50 Allocation 50

10004 110

10005 110

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The vendor is located overseas so we create a landed costs document to track the customs,
freight and insurance costs of the transport.

The total on the landed costs document is 50 and it is divided equally in this case between
the 5 serial numbers.

The journal entry shows a debit of 50 to the inventory and a credit of 50 to an allocation
account.

A cost difference of 10 is added for a total cost of 110 for each serial number.

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 Delivery

▪ A customer purchases 2 tablets.

▪ We ship SN 10001 and SN 10002.

▪ Both have a cost of 110. The price

charged to the customer is irrelevant.

Journal Entry Details

SN# Cost

10001 110
JE Debit JE Credit
10002 110
COGS 220 Inventory 220

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A customer purchases two of the tablets in stock.

We ship the first two serial numbers.
Both the serial numbers have a cost of 110.
The journal entry for the delivery document shows a debit of 220 to the cost of goods sold
and a credit to inventory of 220.
Each tablet is priced at 250. However, the price of the item charged to the customer is not
relevant to the cost.

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 Items Remaining in Inventory

▪ We have sold and shipped 2 tablets.

▪ 3 tablets remain in stock.

▪ The total value of the inventory is 330.

SN# Cost

10003 110

10004 110

10005 110

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We have sold and shipped 2 tablets.

Three of the tablets remain in stock. Each has a cost of 110.
The total value of the inventory in stock is now 330.

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 A/R Return

Journal Entry Details

▪ One tablet is damaged in transit.

JE Debit JE Credit
▪ The customer returns it.
Inventory 110 COGS 110
▪ SN 10001 is returned to stock.

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One tablet is damaged in transit, so the customer returns it.

SN 10001 is returned to stock when it is received.
The journal entry for the A/R return shows a debit to inventory of 110 for the item and credits
the cost of goods sold account for 110.

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 A/R Invoice – Calculating Profit on the Sale

An A/R Invoice is created for the one The cost of the item is subtracted from the
tablet the customer kept. sales price to determine the gross profit.

Choose the Gross Profit icon to view Then the percentage of the gross profit to
the percentage of profit. the cost is calculated.

Gross Profit of Outgoing Invoice

Base Price By Item Cost

Item Base Price Base Total Sales Price Qty Gross Profit Gross Profit %
1 T100 110 110 275 1 165 150

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An A/R Invoice is created for the one tablet the customer kept.
Choose the Gross Profit icon to view the percentage of profit.
The cost of the item is subtracted from the sales price to determine the gross profit.
Then the percentage of the gross profit to the cost is calculated.

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 Revaluation

▪ The damaged tablet is no longer worth 110.

▪ We perform revaluation to have the serial number’s cost

reflect its actual value.

▪ We reduce the cost of SN 10001 from 110 to 75.

Journal Entry Details

JE Debit JE Credit

Stock Variance 35 Inventory 35

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The serial number that was returned with damage is not worth its original value. After
inspecting the item, the value of the item is judged to be reduced by 35 from its previous
value of 110.

Therefore, we perform revaluation to have the serial number’s cost reflect this loss.

We reduce the cost from 110 to 75 to reflect the damage to the tablet.

The journal entry details from the revaluation record a debit to the Stock Variance account for
35 and a credit to the Inventory account value of 35.

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 Inventory Total Value

Inventory for Item T100

SN# Cost

10001 75

10003 110

10004 110

10005 110

_____________

Total 405

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The total value of the items in inventory for tablet item is based on the cost value from each
of the 4 serial numbers in stock. Here we see that the total value is now 405.
The Batches and Serial Inventory Audit report is excellent for viewing these cost details by
serial number or batch.
If you would like to see the total value of the inventory for the item (at the item level rather
than the value at the batch or SN level) then run the Inventory Audit report.

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 Summary

▪ The Serial/Batch valuation method tracks the cost of an item at the serial or batch number
level.
▪ The cost recorded in outbound transactions is for a specific serial number or batch. Therefore,
profitability can be calculated for a specific serial number or individual item in a batch.
▪ The valuation method can be set as a default at the company level. It can be set at the item if
none of this item is in stock or on open documents.
▪ Items using this valuation method are tracked on every transaction.
▪ Batch cost is managed at the company level, not warehouse level.
▪ To ensure that each batch has only one price, you can select the checkbox to block multiple
receipts for the same batch.
▪ The Batches and Serial Inventory Audit report is excellent for viewing cost details by serial
number or batch.

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Here are some key points:

• The Serial/Batch valuation method tracks the cost of an item at the serial or batch
number level.
• Using this method, the cost recorded in outbound transactions is for that specific serial
number or batch. Therefore, profitability can be calculated for a specific serial number or
individual item in a batch.
• The serial / batch valuation method can be set as a default at the company level. The
method can be set at the item if none of this item is in stock or on open documents.
• Items using this valuation method are tracked on every transaction.
• Batch cost is managed at the company level, not the warehouse level. When receiving
the same batch from a different warehouse, the batch cost is calculated based on all
receipts from all warehouses.
• To ensure that each batch has only one price, you can select the checkbox to block
multiple receipts for the same batch.
• The Batches and Serial Inventory Audit report is excellent for viewing cost details by
serial number or batch.

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