Question
How do I calculate the average cost of a part?
Answer
A parts average cost is calculated by dividing the total amount paid for the part, by the quantity in stock.
(This is reset each time the stock holding hits 0 and then a new receipt is completed.)
The way you can figure this out to check this is working correctly would be to;
Review the movements report for the part number and receipts - only work from when the part last had 0 stock holding.
Add up all of the values for the receipts and add up the total quantity - (as above) divide the total value by the quantity and this will be the average.
Average Cost is;
(Current Average Cost x Current Stock Holding) + (Quantity Received x Unit Cost) This figure is then divided by (Previous Stock Holding + Quantity Received)