How to update Weighted Average Unit Cost

There are two ways to update the Weighted Average Unit Cost in Ordoro. This cost is used to calculate the Total Value of Inventory in Ordoro’s Analytics.

  1. Product Detail page
  2. Data import via CSV file

Product Detail page

On the Product Details page, see the section for Weighted Avg Unit Cost. An example screenshot is below.

The PO Unit cost is not the same as the Weighted Average Unit Cost value. Read more about the PO Unit cost here.

Data import via CSV file

Go to Settings -> Data Import -> Update Products. Use the Weighted Average Unit Cost field.

What is Weighted Average Unit Cost?

See definition below for Weighted Average Unit Cost. Definition from this page.

When using the weighted average method, divide the cost of goods available for sale by the number of units available for sale, which yields the weighted-average cost per unit. In this calculation, the cost of goods available for sale is the sum of beginning inventory and net purchases. You then use this weighted-average figure to assign a cost to both ending inventory and the cost of goods sold.

The net result of using weighted average costing is that the recorded amount of inventory on hand represents a value somewhere between the oldest and newest units purchased into stock. Similarly, the cost of goods sold will reflect a cost somewhere between that of the oldest and newest units that were sold during the period.

By default, Ordoro does not auto-calculate what an item’s Weighted Average Unit Cost is. As this value is used in Analytics, and we’re uncertain of if you follow a LIFO, FIFO, or average cost, it is set as a static number.

However, Ordoro can calculate the Weighted Average Unit Cost automatically based on receive purchase orders. Click here for more details.

What is FIFO or LIFO?

Ordoro stores this value as a static value since there are multiple ways to calculate it. Two common ways are FIFO and LIFO. For more information about them, see below. Again, definitions coming from this page.

First in, first out method (FIFO)

  • Under this method, known as FIFO, the first unit added to inventory is assumed to be the first one used.
  • Thus, in an inflationary environment where prices are increasing, this tends to result in lower-cost goods being charged to the Weighted Average Unit Cost.

Last in, first out method (LIFO)

  • Under this method, known as LIFO, the last unit added to inventory is assumed to be the first one used.
  • Thus, in an inflationary environment where prices are increasing, this tends to result in higher-cost goods being charged to the Weighted Average Unit Cost.

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