Calculating Item Cost on an Order Overview

Updated 1 month ago

Check out this short tour on tracking and calculating item cost.

Understanding costs

Configure an item's cost to calculate for P&L on an order with one of these options in the Client Settings > Order Profit & Loss Calculated Using field:

  • Last Cost - Cost of the items in the last purchase order received before the order was created.
    Dropship POs will update the order's item cost to the vendor price on the PO, even though the PO is created after the order. Learn about tracking additional order costs on dropshipped orders.
  • Site Cost - The current value entered in the product summary's Site Cost field.

  • Average Cost - Cost of the units continually averaged. Costs are averaged from the price on the PO at the time the purchase orders are received.
    If the Client Setting used is Average Cost, but Average Cost is zero, then Site Cost is used on the order's P&L tab. Note that the chosen Client Setting is used in SellerCloud's P&L reports.
    There are two kinds of average costs:
    • Simple Average Cost - 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 Average Cost would equal $2.50.

    • Weighted Average Cost - Also factors in quantity. 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 units in stock (30): $80.00 / 30 = $2.67. Note that weighted average only weighs units received against units currently in stock; it does not measure against units since Day One. Using weighted average cost requires enabling the Client Setting Use Weighted Average Cost for PO.
    Dropshipped POs that are set to not count inventory either at the PO 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.
Factoring shipping or third-party costs into average cost

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

Example: If a product costs $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 between the units ordered, producing an average cost of $52.50. 

Priming average cost

Average costs are calculated using the price on the PO at the time the purchase orders are received. However, SellerCloud can "prime" (reset) average cost on the backend to set the cost to a specified value This is typically done during the initial account setup, but can be done anytime that 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. Learn about adjusting Average Costs.

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