The average cost is calculated for each inventory increase or decrease, valued by average. It is calculated as the sum of the invoiced and expected costs divided by the sum of the quantity on hand for value entries with a valuation date equal to or earlier than the inventory decrease being valued.
The average cost can either be calculated per item; or per item, variant and location. This is defined in the Inventory Setup.
The first example shows the effect of calculating the average cost per item:
|
Valuation date |
Location |
Quantity |
Cost Amount (Actual) |
Entry No. |
|
01-01-03 |
BLUE |
1 |
20 |
1 |
|
01-01-03 |
BLUE |
1 |
40 |
2 |
|
01-01-03 |
RED |
1 |
100 |
3 |
|
01-01-03 |
RED |
1 |
200 |
4 |
|
02-01-03 |
BLUE |
-1 |
-90 |
5 |
|
02-01-03 |
BLUE |
-1 |
-90 |
6 |
|
02-01-03 |
RED |
-1 |
-90 |
7 |
|
02-01-03 |
RED |
-1 |
-90 |
8 |
The second example shows the effect of calculating the average cost per item, location and variant:
|
Valuation date |
Location |
Quantity |
Cost Amount (Actual) |
Entry No. |
|
01-01-03 |
BLUE |
1 |
20 |
1 |
|
01-01-03 |
BLUE |
1 |
40 |
2 |
|
01-01-03 |
RED |
1 |
100 |
3 |
|
01-01-03 |
RED |
1 |
200 |
4 |
|
02-01-03 |
BLUE |
-1 |
-30 |
5 |
|
02-01-03 |
BLUE |
-1 |
-30 |
6 |
|
02-01-03 |
RED |
-1 |
-150 |
7 |
|
02-01-03 |
RED |
-1 |
-150 |
8 |
Checking Source Entries for Average Cost