Average Cost Calculation

Inventory valuation does not take into consideration adjustments and count adjustments when determining the new average cost. Only receipt transactions are taken into consideration. This is dependent upon running the inventory valuation monthly to keep the average cost in check.  

The last purchase cost is considered when setting the default issue unit cost. If the last purchase cost differs substantially from the average cost, the last purchase cost is defaulted into the item transaction unit cost.  

Average Cost for Issue Transactions

When creating an issue inventory transaction, a cost value defaults from one of the below fields:  

• Average Cost (IN810_AVG_COST) – Displays on the Inventory Balances screen for the period of the issue transaction.
• IN102_AVG_UNIT_COST – Current average unit cost. This information does not display. The value is used if it is different than the Average Cost on the Inventory Balances screen. This value is equal to the most recent Average Cost value if you properly maintain the Inventory module.
• Unit Cost (IN102_UNIT_COST) – Last transaction unit cost. Displays on the Location tab of the Edit Inventory Item screen in the Unit Cost column.
• Last Purchase Unit Cost (IN102_LAST_PUR_UNIT) – Last purchase unit cost. Displayed on the Locations tab of the Edit Inventory Item screen in the Last Purchase Unit Cost column. 

The cost field used to default the cost value is determined by the following rules in the below order: 

1. If the valuation method is Last Cost and the last purchase cost is not zero, the Last Purchase Unit Cost (IN102_LAST_PUR_UNIT) is used unless it is zero.
2. If the balance record for the period of the issue transaction exists and the quantity for that period is greater than zero and the average cost does not equal zero, the Average Cost (IN810_AVG_COST) is used. This does not generally apply to valuations other than Last Cost. 
3. If the current average unit cost (IN102_AVG_UNIT_COST) is greater than zero, the current average unit cost (IN102_AVG_UNIT_COST) is used. This does not generally apply to valuations other than Last Cost. 

If the resulting cost is significantly different from the Last Purchase Unit Cost, the Last Purchase Cost (IN102_LAST_PUR_UNIT) is used for issue and receipt inventory transactions. This does not apply to Physical Count Batches.