Average cost calculation – PO receipt

You can calculate the average cost using the PO receipt.

Average Cost is calculated upon receipt of a PO using the following:

(Total On Hand Inventory Value PLUS Total Landed Value Received) divided by (New Total Quantity On Hand)

Where:

• Inventory Value has been recalculated
• Total Landed Value equals Expected unit price * Quantity received + Additional cost based on associated cost factors.
• The unit price on the purchase order becomes the cost for the buyer.
  Note: Even though the Sterling Selling and Fulfillment Foundation Supply Collaboration application allows you to specify charges other than unit cost, only the unit price specified in the purchase order is used for calculation of the total value received. Additional costs are calculated based on cost loading factors applicable for the receipt or supplier.

The following example shows the calculation of average cost during a purchase order receipt. The Cost Factor Group referenced in this example is defined in Cost factor group for product imported from international vendors. In this example, the Cost Factor Group is associated with the vendor. Each unit of the item weighs 1 pound.