Average Cost vs Actual Cost Inventory Accounting

When setting up your location settings for RepairQ, you can choose which inventory accounting method you would like to use.



Inventory Item cost is set when you add the inventory item via Purchase order or Manual Restock, or import via Excel. You can also manually edit inventory items to change the cost.

Actual Cost Accounting will use items from your inventory on a "first in, first out" basis. These items will be used and the "cost" associated with them will be the cost that was set when the item was added to the inventory through a purchase order, manual entry or Excel import.

Average Cost is calculated as follows:
 
Each time you add inventory items for a SKU, it recalculates the average cost for all of the inventory items that are not in a terminal status (sold, void, damaged, parts only). 
 
For example, if I have 5 iPad flex cables instock with an average cost of $10, and I stock 5 more iPad flex cables with a cost of $5, then the average cost for all 10 items becomes $7.50.
 
When an item moves into a terminal status (sold, void, damaged, parts only) then the average cost saved for that item is set and does not change as you add/edit inventory items, and the cost for that item does not contribute towards the average cost calculation - it is essentially treated as historical data from that point forward.
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