Home » Categories » 02. Shop Management 5.9 Legacy

How ManagerPlus Calculates Last Cost / Avg Cost

  • Buy 20 widgets for $10 each. You now have 20 of those widgets on the shelf, you spent $200.00 for that inventory (# of units) x (last cost paid), or in this case 10x20=$200. The average cost of each of the widget is $10.00. Logically the total value is $200.00.
  • Now we add another 20 widgets to our inventory; except this time they cost $20.00 each. Hence, we are adding $400.00 of value to the inventory; we then have 40 widgets on the shelf and have paid $200.00 for 20 of them, and $400.00 for the other 20. The total value (cost) of the inventory is now $600.00, the math is: (20 widgets x $10) + (20 widgets x $20) = $600.00. The average cost is then calculated by dividing the total number of units by the total cost, ($600 / 40) = $15.00. So, each widget on the shelf cost an average of $15.00.
  • Now, let’ suppose I have my management system set to markup the cost when selling each widget by 100%, basically double the cost to determine the sale price. If I have my system set to determine Sale Price using Average Cost, each time I use Order Item Edit, the cost will be displayed as $15.00 and the sale price will be $30.00. With 1 widget sold, the inventory would include 39 widgets, which would have a value of 39 x 15, or $585.00.
  • Now let’s suppose the system is set to calculate the sales price by Last Cost. The last cost (the last price paid) as we know is $20.00; when you enter the widget in Order Item Entry, the cost displayed will be $20.00 and the sale price will be $40.00. Assume we didn’t do the previous example and after selling one widget we have 39 in inventory. The cost or total valuation of that inventory is still calculated as 39 x 15 or $585.00, even though we used a ‘cost basis’ of $20.00 to determine the sale price.
  • ManagerPlus also understands the concept of zero on hand inventory. Suppose you purchased the original 20 widgets for $10.00 each – the average cost of each widget of course is $10.00 for a total inventory valuation of $200.00, and the last cost would be $10.00. Suppose you sell all ten widgets, and purchase an additional 20 widgets for $20.00 each. The inventory valuation would then be 20 x 200 or $400.00. The average cost would be updated to $20.00 each and the last cost will then be updated to $20.00.
  • Similarly, purchase the original 20 for $10 each. Sell off 15 of them. Purchase 20 more at $20.00 each. The inventory value is now (5x10) + (20 x 20) or $450. The average cost of each widget now becomes $18.00 (450 / 25). The last cost is $20.00 and the average cost is $18.00.
  • If manager retails one widget based on Average Cost – the sale price using a 100% markup would be $36.00. If manager retails one widget based on Last Cost – the sale price would be $40.00. The total inventory value in either case would still remain $18.00 times 24 widgets, or $432.00.
1.67 (3)
Article Rating (3 Votes)
Rate this article
Attachments Attachments
There are no attachments for this article.
Comments Comments
Related Articles RSS Feed
Shop Mgmt Keyboard Shortcuts (5.9.x)
Viewed 4196 times since Wed, May 23, 2012
Odometer In value is required by the system manager. Please enter a value greater than or equal to the Previous Odometer
Viewed 8415 times since Thu, Jul 26, 2012
Swap Personalized Plate To Customer’s Diff Car
Viewed 8430 times since Wed, Oct 8, 2008
Winhelp32 (winhlp32.exe) Missing / Training Videos not working
Viewed 8342 times since Mon, Oct 8, 2012
Remove Words From Custom Dictionary
Viewed 1644 times since Fri, Oct 30, 2009
30/60/90 Button Error Msg - How To Fix
Viewed 8688 times since Wed, Jun 11, 2008
Recommendations Unable to Be Saved
Viewed 1247 times since Thu, Jul 26, 2012