# Average Cost

Updated 1 year ago

Average Cost is the cost of units continually averaged. Costs are averaged from the price on the PO at the time the POs are received.

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.

For example, if the product cost \$50.00 and shipping costs \$5.00, Average Cost on the product's Purchasing page (Product > Toolbox > Purchasing) will be \$55.00. If you ordered 2 units with a total PO shipping cost of \$5.00, Average Cost will be divided among units ordered, resulting in an average cost of \$52.50.

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