You can calculate the average cost based up the work order completion.
Average Cost is calculated upon receipt of a work order completion using the following:
(On-hand Inventory value + Total value of finished item) divided by (New on hand quantity)
Where:
The following example shows the calculation of average cost during a work order completion. The Cost Factor Group referenced in this example is defined in Kitted finished product cost. In this example, the Cost Factor Group is associated with the Enterprise.
Current on-hand quantity before work order completion = 500.
Inventory value before completion = $5000.
A work order for 1000 units of the finished good is received.
The finished good is made up of the following components:
When a work order for 1000 units for this finished good is completed, the total value of the finished item is calculated as:
Component cost | (1000 * $2.10) + (1000*6.20) = $8300 | |
---|---|---|
Labor Cost | (20%) | 0.2 * 8300 = $1660 |
Supplies | ($3.00/unit) | $3000 |
Total increase in inventory value = $12,960.00
The new Average cost is calculated as:
($5000 + $12960) / (500 + 1000) = $11.973333