Inventory > Tracking Inventory Costs

Inventory

RetailEdge tracks both a Cost (Last Received Cost) and an Average Cost for inventory items. The cost can be modified and is changed every time an item is received at a new cost. Average Cost is calculated at the time the item is received into inventory (Update Inv). The Average Cost is calculated as follows:

Average Cost = ((Current Inventory Average Cost X Quantity in Inventory) +

(Received Inventory Cost X Number Items Received)) /

(Total Inventory Quantity + Total Received Quantity)

For instance, if you have 5 items in your inventory with an average cost of $5.00 and you receive 5 more at a cost of $6.00, the average cost will be calculated as follows:

Average Cost = ((5.00 x 5) + (6.00 x 5)) / (5+5)

Average Cost = [$25.00 + $30.00] / 10

Average Cost = $5.50

The first time you receive an item your cost and average cost will be the same.

Inventory reports will display the average cost of the item.

You can change the average cost of an item manually by pressing the Reset Avg Cost button on the Inventory Editor Price tab.

Sales

At the time of sale, RetailEdge stores the current inventory average cost in the Transaction Log. This average cost is the value that is used for Sales Reports.

Receiving and Purchase Orders

Receiving uses the actual cost of the item at the time that the user received the items. This cost value is stored in the historical receiving record. When you add items to receiving and purchase orders, RetailEdge uses the inventory cost value (last received cost). You should change this as appropriate during receiving or when creating purchase orders. Receiving reports will display the actual cost of the item at the time it was received.