This article provides the following information:
- Definition of Average Cost
- Resources for advanced info about Average Cost
- Two types of Average Cost and their calculations
- Difference between Average Cost and Gross Cost
Introducing Average Cost
Average Cost is the cost of units continually averaged from the price on the PO at the time POs are received. The two types of average cost are explained below.
- Take an advanced look at how Average Cost is used to calculate an order’s Item Cost, including how a weighted average can calculate a more accurate profit, in this instructional video.
- PO shipping costs or third-party costs can be factored into Average Cost. Learn all about how to factor these other costs into Average Cost.
- Explore how to manually change/set Average Cost:
Two types of Average Cost
| Type | Sample Calculation |
| Simple Average Cost – Cost of a single unit against the cost of another single unit. | 10 units at $2.00/piece and 20 units at $3.00/piece.
Quantities are ignored and only average the dollar values. Thus, Average Cost = $2.50. |
| Weighted Average Cost – Factors in quantity.*
Weighted average only weighs units received against units currently in stock, not units since Day One. *Sellercloud will consider both Sellable and Non-Sellable quantities in the warehouses, but quantities in Dropship warehouses will be excluded from the Average Cost calculation. |
10 units at $2.00/piece = $20.00 and 20 units at $3.00/piece = $60.00.
The total cost of $80.00 is divided by all units received, which is 30. $80.00 / 30 = Weighted Average Cost of $2.67. To calculate with a weighted average, you must select Use Weighted Average Cost for PO in the Client Settings. |
Yes, the latter excludes quantity from its calculation:
Gross Cost – Average of the Adjusted Price + Extra Cost (Per Unit) + Extra Cost (PO Based Per Unit) for the product from all previous POs.
You can see Gross Cost on the product’s Summary (show me where), but only if you select Enable PO Based Extra Costs in the Client Settings.
