Inventory Costing
Inventory costing decides what each item you sell cost you. Homwe records that as Cost of Goods Sold when you post a sale.
Where to find it
Section titled “Where to find it”Go to Settings → Inventory Costing.
Costing method
Section titled “Costing method”Homwe uses the weighted average method.
How weighted average works
Section titled “How weighted average works”Homwe keeps one running average cost per product, per location, in your default currency.
-
When you buy (post a purchase invoice or receipt), the average is recalculated:
new average = (stock on hand × old average + quantity bought × purchase cost) ÷ (stock on hand + quantity bought)
Foreign-currency purchases are converted to your default currency first.
-
When you sell, the average doesn’t change. Cost of Goods Sold is the quantity sold × the current average cost.
-
Stock takes and adjustments are valued at the average cost.
-
Transfers carry the cost from when they were dispatched, which is then mixed into the receiving location’s average cost when accepted.
Example
Section titled “Example”You have 10 units at an average cost of $5. You buy 10 more at $7. The new average is (10 × 5 + 10 × 7) ÷ 20 = $6. When you then sell 4 units, $24 goes to Cost of Goods Sold.