Method of updating average price

  • Cumulative Purchases

    The average landed cost is based on the following:

    • The price of a new receipt.
    • The average price of the cumulated purchases up to the time of the new receipt.
          
APN = ((PR * QR) + (APO * CRO)) ÷  (QR + CRO)
  • Current Inventory

    The average landed cos is based on the following:

    • The price of a new receipt.
    • The average price of the current inventory level.
          
APN = ((PR * QR) + (APO * ILO)) ÷ (QR + ILO)
  
    APNAverage landed cost (new)
    APOAverage landed cost (old)
    PRPrice of the new receipt
    QRQuantity of the new receipt
    CROCumulative receipt quantity (old)
    ILOInventory level (old)

    Old (current) inventory considers the existing inventory on hand minus the not yet matched and approved receipts. Consequently, the average cost is based on financially matched and approved purchases.

    If the method is set to Current Inventory and the APN calculation outcome is negative, the average landed cost is equal to the latest landed cost.