To see more information on Product cost calculation, see here.
Average Cost
Average Cost is a weighted average of costs dependent on the amount of company-owned inventory prior to the purchase and the quantity of inventory being purchased.
Average Cost departments are considered standard in Agvance.
Increasing/decreasing inventory with a Purchase Invoice or manufacturing Products will update the Average and Last Costs.
Estimated Average Cost
Some Products in inventory may have volatile costs that change frequently (like fuel) where costs are set at the time of delivery and change multiple times before the Purchase Invoice is available.
Note: It is best to wait until month-end to change an Inventory Department to an Estimated Average Cost department. More details can be found here.
Products in an Inventory Department set to Average or Last Cost on the GL Posting tab will not have the most recent cost reflected when calculating margins if the product is sold prior to the Purchase Invoice being entered.
Setting the Inventory Department to Estimated Average (G/L Posting tab at Accounting / Setup / Inventory Departments) means sales margins will be based on the more timely Estimated Average Cost and therefore be more accurate (this can be seen on the Sales Analysis report with Gross Margin Calculation checked). The Last and Average Costs will still be updated.
Note: This option requires adding the Purchase Receipt to capture the cost at that time. Entering a priced Purchase Order is recommended as this will carry forward to the Purchase Receipt.
