Product Average Cost

Overview

The Average Cost is the continually updated average of a Product’s Cost on Purchase Orders (POs) at the time of their receipt. Sometimes, PO shipping costs or third-party costs can also be factored into the Average Cost – see Purchase Order Costs Explained to learn more.

Sellercloud considers quantities received in the following Warehouse Types in the Average Cost calculation:

• Sellable – included in the calculation
• Non-Sellable – included in the calculation
• Dropship – excluded from the calculation

Average Cost Calculations

There are two different types of Average Cost calculations – Simple and Weighted Average Cost.

Simple Average Cost

This Average Cost Type is averaged only by the dollar value, ignoring unit quantities.

For example:

• You receive a PO of 10 units at $2 per unit.
• You receive a PO of 20 units at $3 per unit.
• The Simple Average Cost is the average of $2 and $3, which is $2.50.

This is the default calculation applied when the client setting Use Weighted Average Cost for PO is disabled.

Weighted Average Cost

This Average Cost Type factors in both quantity and price.

For example:

• You receive a PO of 10 units at $2 per unit ($20 in total)
• You receive a PO of 20 units at $3 per unit ($60 in total).
• The Weighted Average Cost is the total item cost ($80) divided by all received units (30), which is $2.67.

The Weighted average calculation type only weighs units received against units currently in stock, not units since Day One.

Kit Products

When the Client Setting Enable ALL Kits Cost calculation Once a day is enabled, the Average Cost of All Components and Main Component kit parents will be updated once daily based on the costs of their kit components.

To do the same for Independent kit parents, enable Enable Kit Cost Calculation For Independent Kits Too. Otherwise, the cost calculation of independent kit parents will come only from Assembling and Receiving POs, and kit component costs won’t be considered.

Adjust Average Cost

There are three ways to adjust the Average Cost:

• Manually per product
• In bulk for multiple products
• Prime the cost to a specific value

Per Product

To update a single product:

1. Go to a Product Details Page.
2. Click Edit on the top right or on the Purchasing panel.
3. To the right of the Average Cost field, click the Open Average Cost Details option.
   
4. In the Average Cost Details panel that appears, click the Add cost adjustment plus icon.
   
5. Enter the adjustment Amount – it can be a positive or negative value.
6. The Per Unit Adjustment box works as follows:
   1. When it is unchecked, the adjustment amount will be distributed across the inventory currently in stock. For example, if you have 100 units in stock with an Average Cost of $100 and you add an adjustment of $10, the Average Cost will become $100.10, since 10/100 = 0.1.
   2. When it’s checked, if you add an adjustment of $10 and your previous Average Cost was $100, the new Average Cost will be $110, regardless of how many units you currently have in stock.
7. Specify the Reason for the adjustment and click Add.

The product’s Average Cost will be automatically recalculated to include the adjustment. The notification message will appear, and the relevant record will be logged in the Average Cost Details panel.

In Bulk

To update multiple products:

1. Go to Catalog > Tools > Import Product Info.
2. Select Import Product Average Cost Adjustments.
3. To download a sample template file, click the Download icon.
   
4. Populate the following columns and save the updated file: 
   1. ProductID – Enter a product’s SKU.
   2. Amount – Enter the adjustment amount.
   3. IsAmountPerUnit – TRUE or FALSE.
   4. Reason – Enter a reason for the adjustment.
      
5. Click the File field and select the updated file on your computer.
6. Click Import.

Prime Average Cost

With Sellercloud, you can always reset the Average Cost and set it to a specific value. This is typically done during your initial account setup in order to prime the average cost of a product, but it can be done whenever you need to. To make specific average cost adjustments, populate this Prime Average Cost import template and submit it to Sellercloud Support.

Once the Prime Average Cost file is imported, all inventory movements created before the date indicated will be ignored in the average cost calculation. Only inventory movements done after that date will impact the Average Cost value.

Average costs can even be backdated and retroactively applied to update item costs in existing orders. When Recalculating the Orders, the item cost is updated based on the value of App Setting PredictMissingAverageCostMovementIDForOrder. This update can be either based on the historical average cost at the order’s creation or the most recent average cost. Custom plugin “Update Average Cost Order Export” may be required to perform this action. Contact Sellercloud Support if you ever need to do this!

Client Settings

Refer to the table below for a list of Average Cost-related Client Settings and their descriptions.