Hello Managers,
Ver.25.12.2.3146
Iam in the process of setting up a new business with a lot of items as a starting inventory items balance
after 1 transaction I found that that the starting balance (Qty & AVCO) input firstly is not included in the new AVCO after the first transaction on the item showing different Average
the starting balance:
the cost/unit after the first transaction only show the average for the new transaction not for the whole Qty:
I fetched for the cost correction sheet but i cannot find it neither in the inventory item tab nor in the setting tab and I’m not sure if it can help
Looking forward to our kind help
Thanks
Hello @Mahmoud_Mohsen1,
This is normal. Inventory valuation methods are used to estimate the costs for two things:
- Inventory outflows such as sales, write-offs and/or transfers
- The remaining inventory balance after such outflows
In the case of inflows such as purchase or, in your case, production a better more accurate and reliable options are available such as purchase price and production costs.
This new inflow – Production – will not assume the historic average cost which is now obsolete. Instead, this production will update the average cost.
In your example, the starting average cost was 157.928, and when you added 10 units @ 158.559, the new average becomes 157.941 following this calculation (478 × 157.928 + 10 × 158.559) ÷ 488
If, on the other hand, your first transaction was a sale of 10 units, then the assumed cost per unit would have been 157.928 (your starting cost) for lack of a better estimate.
Similarly, if you make a sale now, it will assume the new average cost of 157.941.
1 Like
