Inventory/ Understanding Stock Item Costing

3.0. Understanding Stock Item Costing

How Is Stock Item Costing Calculated?

The system uses Weighted Average Cost as the method of calculating Ending Inventory cost. It takes Cost of Goods (Stock Items) available for Sales and divides it by the total quantities of the goods. This gives a Weighted Average Cost per Unit.

Purchasing 1st Batch Of Printer At $180


Alert
STEPS:
  1. Click PURCHASES activity
  2. Click SUPPLIER INVOICE module
  3. Click NEW
  4. VENDOR select (or create)
    In-Time Supplier Pte Ltd
Details:
  1. ITEM select HP Printer
  2. QTY enter 10
  3. UNIT PRICE enter 180
  4. TOTAL check for 1,962
  5. Click ADD
  6. $1962 is after GST.

Check If Unit Printer Cost Is $180


Alert
STEPS:
  1. Click REPORT activity
  2. Click INVENTORY
  3. Click STOCK module
  4. Click REFRESH
  5. UNIT COST check for 180
  6. COST check for 1,800

Purchasing 2nd Batch Of Printer At $210


Alert
STEPS:
Click NEW
VENDOR select (or create)
In-Time Supplier Pte Ltd
Details:
ITEM select HP Printer
QTY enter 5
UNIT PRICE enter 210
TOTAL check for 1,144.50
Click ADD

Check If Unit Printer Cost Is $190


Alert
STEPS:
  1. Click REFRESH
  2. UNIT COST check for 190
  3. COST check for 2,850 10sets @ $180 = $1,800
5sets @ $210 = $1,050 Weighted Average Cost (WAC)
= ($1,800 + $1,050) / (10sets +5sets) = $2,850 / 15 = $190

Different Cost Allocated When Selling Of Stock Item At Different Period


Alert
STEPS:
Select the same Invoice
Click EDIT
Click GL
ACCOUNT check for
Cost of Goods Sold is 950 Cost of Goods Sold @ $190 x 5 = $950
Close General Ledger module
Click UNDO for Invoice

Selling 5 Sets Of Printer In Period 1



Alert
STEPS:
  1. Click PURCHASES activity
  2. Click SUPPLIER INVOICE module
  3. Click NEW
  4. VENDOR select (or create)
  5. In-Time Supplier Pte Ltd
  6. Details:
  7. ITEM select HP Printer
  8. QTY enter 5
  9. UNIT PRICE enter 205
  10. TOTAL check for 1,117.25
  11. Click ADD

Buying 5 Sets Of Printer At $195


Alert
STEPS:
  1. Click REFRESH
  2. UNIT COST check for 195
  3. COST check for 2,925
10sets @ $190 = $1,900
5sets @ $205 = $1,025 WAC = ($1,900 + $1,025) / (10sets +5sets)
= $2925 / 15 = $195


Selling 5 Sets Of Printer In Period 2



Alert
STEPS:
  1. Click SALES activity
  2. Click INVOICE module
  3. Select the previous invoice
  4. Click DUPLICATE
  5. TOTAL check for 1,605
  6. Click ADD


Alert
STEPS:
  1. Select the same Invoice
  2. Click EDIT
  3. Click GL
  4. ACCOUNT check for Cost of Goods Sold is $975
  5. Close General Ledger module
  6. Click UNDO for Invoice