Calculating Item Cost on an Order Overview

YouTube Video

An item's cost can be set in the Client Settings (Cost Related section) to calculate for P&L on an order by:
  • PO Last Cost - the cost of the items in the last purchase order received before the order was created. Dropship POs, however, will update the item cost on the order to the vendor price on the PO, even though the PO is created after the order.The following client setting must be enabled -  Enable Track P&L using VendorCost for DropShip PO.
  • Site Cost - the current value that is entered in the Site Cost field on the Product Summary page.
  • Average Cost - the cost of the units continually averaged. The costs are averaged from the price on the PO at the time the purchase orders are received. See below. There are two kinds of average costs:
    1. Simple Average Cost which simply looks at the cost of a single unit against a cost of another single unit. For example, 10 units at $2.00 a piece and 20 units at $3.00 a piece, the quantities are ignored, while only averaging the dollar values. Therefore, the the Average Cost would equal $2.50.
    2. Weighted Average Cost factors in the quantity as well. 10 units at $2.00 a pieces = $20.00. 20 units at $3.00 a piece = $60.00. The total cost of $80.00 is then divided by all the units in stock, which in our example is 30. $80.00 / 30 = $2.67. Please note that the weighted average only weighs units being received against units that are currently in stock. It does not measure against 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.
Note: PO shipping costs, or other third party costs, can be factored into the average cost as well.  These cost can be averaged into the cost of an item to give an accurate profit and loss 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, the 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, the average cost will be divided among the units ordered, resulting in an average cost of $52.50. 

  • Please note: If client setting is set to use Average Cost and Average Cost is zero, the Site Cost will be used instead in the profit and loss tab on the order. However, the P&L Reports will only look at what has been set in the client settings.
  • Vendor Price for dropshipped PO - When drop shipping an order, the vendor price on the related PO will update the item cost on the order. Client setting Enable Track P&L using VendorCost for DropShip PO must be enabled. Read more about tracking additional order costs on dropshipped orders here
  • Dropshipped POs that are set not to not count inventory  - either at PO level or Vendor level (setting on Dropship Preferences on vendor toolbox. Default = True) - will not create an inventory movement or average cost movement record. this means they will not be factored into average cost. 

Priming the Average Cost

Average costs are calculated using the price on the PO at the time the purchase orders are received. However, SellerCloud can "Prime" or "reset" the average cost on the back end to set the cost to a specified value This is typically done during the initial account set-up, but can be done at anytime if a reset is needed. Average costs can even be backdated to update existing orders that have incorrect item costs. Please contact SellerCloud Support if average costs need to be primed. Read more about adjusting Average Costs here.

How did we do?