Difference between revisions of "Inventory: Understanding Average Cost"

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===Simple Case===
 
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Inventory Simple Case - Avg Cost IS impacted by Sequence!!!
 
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{|
 
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| width="50%" valign="top" |
 
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{| class="wikitable"
 
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! TxType !! EFFCTV QTY !! ACCUMQTY !! COST !! TOTCOST !! ACCUMBAL !! AVGCOST
 
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|-
 
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| B || 100 || 100 || 15 || 1500 || 1500 || 15
 
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|-
 
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| S || -50 || 50 || 15 || -750 || 750 || 15
 
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|-
 
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| I || 10 || 60 || 20 || 200 || 950 || 15.83333333
 
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|}
 
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| width="50%" valign="top" |
 
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{| class="wikitable"
 
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! TxType !! EFFCTV QTY !! ACCUMQTY !! COST !! TOTCOST !! ACCUMBAL !! AVGCOST
 
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|-
 
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| B || 100 || 100 || 15 || 1500 || 1500 || 15
 
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|-
 
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| I || 10 || 110 || 20 || 200 || 1700 || 15.45454545
 
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|-
 
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| S || -50 || 60 || 15.45454545 || -772.7272727 || 927.2727273 || 15.45454545
 
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|}
 
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|}
 
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===Inventory With Reversal - All Positive===
 
===Inventory With Reversal - All Positive===
  
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! TxType !! QTY !! ACCUMQTY !! COST !! ACCUMBAL !! AVGCOST
 
! TxType !! QTY !! ACCUMQTY !! COST !! ACCUMBAL !! AVGCOST
 
|-
 
|-
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| B || 100 || 100 || 15 || 1500 || 15
+
| Beg Bal || 100 || 100 || 15 || 1500 || 15
 
|-
 
|-
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| S || -50 || 50 || 15 || 750 || 15
+
| Sale || -50 || 50 || 15 || 750 || 15
 
|-
 
|-
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| I || 10 || 60 || 20 || 950 || 15.83333333
+
| Purchase || 10 || 60 || 20 || 950 || 15.83333333
 
|-
 
|-
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| S || 200 || 260 || 15.83333333 || 4116.666667 || 15.83333333
+
| Sale || 200 || 260 || 15.83333333 || 4116.666667 || 15.83333333
 
|-
 
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| I || 10 || 270 || 20 || 200 || 15.98765432
+
| Purchase || 10 || 270 || 20 || 200 || 15.98765432
 
|-
 
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| S || -200 || 70 || 15.98765432 || 1119.135802 || 15.98765432
+
| Sale || -200 || 70 || 15.98765432 || 1119.135802 || 15.98765432
 
|}
 
|}
  
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! TxType !! QTY !! ACCUMQTY !! COST !! ACCUMBAL !! AVGCOST
 
! TxType !! QTY !! ACCUMQTY !! COST !! ACCUMBAL !! AVGCOST
 
|-
 
|-
−
| B || 100 || 100 || 15 || 1500 || 15
+
| Beg Bal || 100 || 100 || 15 || 1500 || 15
 
|-
 
|-
−
| S || -50 || 50 || 15 || 750 || 15
+
| Sale || -50 || 50 || 15 || 750 || 15
 
|-
 
|-
−
| I || 10 || 60 || 20 || 200 || 15.83333333
+
| Purchase || 10 || 60 || 20 || 200 || 15.83333333
 
|-
 
|-
−
| S || 200 || 260 || 15.83333333 || 4116.666667 || 15.83333333
+
| Sale || 200 || 260 || 15.83333333 || 4116.666667 || 15.83333333
 
|-
 
|-
−
| S || -200 || 60 || 15.83333333 || 950 || 15.83333333
+
| Sale || -200 || 60 || 15.83333333 || 950 || 15.83333333
 
|-
 
|-
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| I || 10 || 70 || 20 || 1150 || 16.42857143
+
| Purchase || 10 || 70 || 20 || 1150 || 16.42857143
 
|}
 
|}
  
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! TxType !! QTY !! ACCUMQTY !! COST !! ACCUMBAL !! AVGCOST
 
! TxType !! QTY !! ACCUMQTY !! COST !! ACCUMBAL !! AVGCOST
 
|-
 
|-
−
| B || 100 || 100 || 15 || 1500 || 15
+
| Beg Bal || 100 || 100 || 15 || 1500 || 15
−
|-
 
−
| S || -50 || 50 || 15 || 750 || 15
 
−
|-
 
−
| I || 10 || 60 || 20 || 950 || 15.83333333
 
−
|-
 
−
| I || 10 || 70 || 20 || 1150 || 16.42857143
 
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|-
 
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| S || 200 || 270 || 16.42857143 || 4435.714286 || 16.42857143
 
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|-
 
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| S || -200 || 70 || 16.42857143 || 1150 || 16.42857143
 
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|}
 
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|}
 
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===Inventory With Sale/Reversal - Gets Negative===
 
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{|
 
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| width="50%" valign="top" |
 
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Similar to the case where items were positive, the impact of matching Negative and Postive record have no net effect even when the accumlative qty goes negative:
 
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{| class="wikitable"
 
−
! TxType !! EFFCTV QTY !! ACCUMQTY !! COST !! ACCUMBAL !! AVGCOST
 
−
|-
 
−
| B || 100 || 100 || 15 || 1500 || 15
 
−
|-
 
−
| S || -50 || 50 || 15 || 750 || 15
 
−
|-
 
−
| I || 10 || 60 || 20 || 950 || 15.83333333
 
−
|-
 
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| S || -200 || -140 || 15.83333333 || -2216.666667 || 15.83333333
 
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|-
 
−
| S || 200 || 60 || 15.83333333 || 950 || 15.83333333
 
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|-
 
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| I || 10 || 70 || 20 || 200 || 16.42857143
 
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|}
 
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| width="50%" valign="top" |
 
−
 
 
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If a purchase comes between a negative sale and reversal, the ending avg. cost is impacted, but this is still perfectly acceptable and correct handling for the data given.
 
−
{| class="wikitable"
 
−
! TxType !! EFFCTV QTY !! ACCUMQTY !! COST !! ACCUMBAL !! AVGCOST
 
−
|-
 
−
| B || 100 || 100 || 15 || 1500 || 15
 
 
|-
 
|-
−
| S || -50 || 50 || 15 || 750 || 15
+
| Sale || -50 || 50 || 15 || 750 || 15
 
|-
 
|-
−
| I || 10 || 60 || 20 || 950 || 15.83333333
+
| Purchase || 10 || 60 || 20 || 950 || 15.83333333
 
|-
 
|-
−
| S || -200 || -140 || 15.83333333 || -2216.666667 || 15.83333333
+
| Purchase || 10 || 70 || 20 || 1150 || 16.42857143
 
|-
 
|-
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| I || 10 || -130 || 20 || 2016.666667 || 15.51282051
+
| Sale || 200 || 270 || 16.42857143 || 4435.714286 || 16.42857143
 
|-
 
|-
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| S || 200 || 70 || 15.51282051 || 1085.897436 || 15.51282051
+
| Sale || -200 || 70 || 16.42857143 || 1150 || 16.42857143
 
|}
 
|}
 
|}
 
|}

Revision as of 18:52, 25 October 2023

Inventory With Reversal - All Positive

Inventory with a sale reversal, but keeping it positive! All good, but sequence matters

Here, a purchase receipt comes between the +Reversal and -Sale record.

TxType QTY ACCUMQTY COST ACCUMBAL AVGCOST
Beg Bal 100 100 15 1500 15
Sale -50 50 15 750 15
Purchase 10 60 20 950 15.83333333
Sale 200 260 15.83333333 4116.666667 15.83333333
Purchase 10 270 20 200 15.98765432
Sale -200 70 15.98765432 1119.135802 15.98765432

Here, The +Reversal comes immediatelyh before the -Sale record.

TxType QTY ACCUMQTY COST ACCUMBAL AVGCOST
Beg Bal 100 100 15 1500 15
Sale -50 50 15 750 15
Purchase 10 60 20 200 15.83333333
Sale 200 260 15.83333333 4116.666667 15.83333333
Sale -200 60 15.83333333 950 15.83333333
Purchase 10 70 20 1150 16.42857143

If sale and reversal are together - it doesn't matter the sequence!

TxType QTY ACCUMQTY COST ACCUMBAL AVGCOST
Beg Bal 100 100 15 1500 15
Sale -50 50 15 750 15
Purchase 10 60 20 950 15.83333333
Purchase 10 70 20 1150 16.42857143
Sale 200 270 16.42857143 4435.714286 16.42857143
Sale -200 70 16.42857143 1150 16.42857143
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