Adjusting Average Costs

Typically, a product’s Average Cost is recalculated when a purchase order is received, but receiving a PO will only account for purchasing costs. The PO does not account for external product-related costs such as production, molds, artwork, etc. Those costs can be manually added to adjust the product’s Average Cost.

Here’s an example:

  • If 100 units are in stock at $444/piece and a $5000 artwork adjustment is added, Average Cost is $494. (See the Amount is per unit adjustment option below to distribute or apply to each unit.)
This feature will add adjustment amounts that will be recalculated to obtain Average Cost. To reset an Average Cost to a specific value, download and populate this Prime Average Cost import template and submit it to Sellercloud Support to prime the average cost.

Understanding average cost

There are 2 kinds of average costs:

  • Simple Average Cost – Looks at the cost of a single unit against a cost of another single unit. Here’s an example:
    • 10 units at $2.00/piece and 20 units at $3.00/piece. Quantities are ignored while only averaging the dollar values. Thus, Average Cost is $2.50.
  • Weighted Average Cost – Also factors in quantity. Here’s an example:
    • 10 units at $2.00/piece = $20.00 and 20 units at $3.00/piece = $60.00. Total cost of $80.00 is divided by all units received, in this example, 30. $80.00 / 30 = Weighted Average Cost of $2.67.

Note that weighted average only weighs units received against units currently in stock, not units since Day One. To calculate with a weighted average, select Average Cost as above and enable the Client Setting Use Weighted Average Cost for PO. Sellercloud will consider in the calculations both Sellable and Non-Sellable quantities in the warehouses; however, quantities in Dropship warehouses will be excluded from the Average Cost calculation.

PO shipping costs or other third-party costs can also be factored into Average Cost. These can be averaged into the item cost to get an accurate P&L report by enabling the Client Setting Consider PO Extra Costs when Calculating Product Costs.

Adjusting average cost

  1. Enable the Client Setting Enable Average Cost Adjustments.
  2. On the Product Summary, find the Average Cost field and click the hyperlinked value to open the Average Cost detail showing the average cost movement.
  3. At the top left, enter the adjustment Amount. This can be a positive or negative value.
  4. For the Amount is per unit adjustment option:
    1. Select it – To apply the adjustment amount to each unit currently in inventory. Example: If you have 100 in stock with Average Cost = 100 and you add an adjustment for 10, the result will be Average Cost = 110.
    2. Unselect it – To distribute the adjustment amount equally across all current inventory of this product. Example: If you have 100 in stock with Average Cost = 100 and you add adjustment for 10, the result will be Average Cost = 100.10 (10/100 = 0.1).
  5. Enter a Reason, such as “Artwork.”
  6. Click Add Adjustment. Average cost will be recalculated to include the adjustment, which will appear in the grid’s Trans. Type column as Avg_Cost_Adjustment.
Learn more about recalculating P&L.

Importing average cost adjustments

  1. Enable the Client Setting Enable Average cost adjustments.
  2. Bulk-add Average Cost adjustments to multiple products through a file import:
    1. Click Inventory > Import Product Info > Import Product Average Cost Adjustments.
  3. Download the Product Avg Cost Adjustments template and delete the sample data.
  4. Populate the column as explained above. Use values TRUE or False in the IsAmountPerUnit column.
  5. Save the file and Choose File.
  6. Click Import Avg. Cost Adjustments to import the adjustments.

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