Why does my cost price not match the cost price on my Purchase order
How average weighted cost pricing works
A common question that we have crop up is why, when I have sold an item, does the current cost price not match the cost price on the Purchase Order?
To understand this you need to be able to understand that all our systems are set up to use the 'Weighted Average' cost price update method. This method has a number of advantages, the main one being that your stock valuation will be as accurate as possible at any given point in time.
On Citrus Lime Cloud POS this works using two different cost prices, these are as follows:-
The Average Weighted Cost:
And the Supplier cost price:
Once an item is created, the average weighted cost field is locked, the supplier cost price is updated from the purchase order and goods in screen.
You must ensure that you are adhering to the following process:-
As you are creating a purchase order or receiving goods, you must check the cost price and update it when applicable. When you are replenishing goods of which you already hold stock, you will use this new supplier cost price to update the average weighted cost price. If you are receiving goods that you do not currently hold stock of, it will copy the supplier cost price into the average weighted cost price.
The movement report below shows an item that I have received against a previous purchase order with a cost of £10.00.
You can see that I have then received a second delivery of the same item, against a second PO and the cost has reduced to £5.00. So now when I sell this item it will be sold at an Average Weighted cost price of £7.50: