Unit Cost Calculation

As a basic rule, the value in the Unit Cost field on the item card is based on the standard cost for items with costing method standard. For items with all other costing methods, it is based on the calculation of the inventory on hand (invoiced costs and expected costs) divided by the quantity on hand.

How the contents of the Costing Method field influence the unit cost calculation for purchases and sales is described in more detail in the following sections.

Unit Cost Calculation for Purchases

When you purchase items, the program always copies the value in the Last Direct Cost field on the item card to the Direct Unit Cost field on a purchase line or to the Unit Amount line on an item journal line.

What you select in the Costing Method field influences how the program calculates the contents of the Unit Cost field on the lines as described in the following two sections.

Costing Method FIFO, LIFO, Specific or Average

The program calculates the contents of the Unit Cost (LCY) field on the purchase line or the contents of the Unit Cost field on the item journal line according to this formula:

"Unit Cost (LCY)" = ("Direct Unit Cost" - ("Discount Amount"/ Quantity)) * (1 + "Indirect Cost %" / 100)) + "Overhead Rate"

Costing Method Standard

The program fills in the Unit Cost (LCY) field on the purchase line or the Unit Cost field on the item journal line by copying the value in the Unit Cost field on the item card. With costing method set as Standard, this is always based on the standard cost.

When you post the purchase, the program copies the unit cost from the purchase line or item journal line to the purchase item invoice entry, and it can be seen on the entry list for the item.

All Costing Methods

The program always uses the unit cost from the source document line to calculate the contents of the Cost Amount (Actual) field (or, if applicable, the Cost Amount (Expected) field) relating to this item entry, regardless of the costing method of the item. The amount in the Average Cost (LCY) field is calculated on the form, so when you access the Item Card or the Item List, the program automatically checks to get the latest changes to this field.

Unit Cost Calculation for Sales

When you sell items, the program always copies the unit cost from the Unit Cost field on the item card to the sales line or the item journal line.

When posting, the program copies the unit cost to the sales invoice item entry, and it can be seen on the entry list for the item. The program uses the unit cost from the source document line to calculate the contents of the Cost Amount (Actual) field (or, if applicable, the Cost Amount (Expected) field) in the value entry related to this item entry.

Related Topics

Costing Method

Value Entry

Average Cost