So you run Sage Evolution and realize that a stock item has 3 different costing methods:
– Weighted Average
– Latest Cost
– Manual Cost
Do you understand how this works? Well I hope this will clear the air a bit
- Item costed using Weighted Average
Item starts with 0.00 cost on it. You then GRV 100 units in at 0.10c p/unit,
Item as seen above will now be costed at 0.10c p/unit. you now receive on same unit 50 units of an item at 8.50 p/unit, system will now average the cost out as shown below to 2.90 p/unit
If you now sell some of these units, the system moves the stock out of your system at this new average cost of 2.90 p/unit, so lets assume you sell 10 units at 35.00 p/unit (excl.), the following happens on your general ledger;
So using this way of costing will always average the cost of item and when selling, move it out your system at this average cost method.
2. Item costed using Latest Cost
Again, the item starts off with a 0.00 cost p/unit. You then GRV 100 units in at 0.10c p/unit. Item cost will now be 0.10cp/unit.
You then GRV in 50 units at 8.50 p/unit, system will do following to costing;
As the items that costed 0.10c p/unit is now costed at 8.50 p/unit Sage Evolution needs to account for this of course, so at the time of bringing the 50 units, Sage Evolution takes the 100 units previously GRV in and calculates at this stage a 8.40 p/unit difference and does the following on your General Ledger
You now sell 15 units at 0.50c p/unit
In this case Income was 7.50 but costs now 127.50 making a GP of –R120.00
3. Item costed using Manual Costing
Again, item starts off with 0.00 cost. To adjust the cost of an item using manual cost, an adjustment needs to be run. As below, here you adjust cost to 5.00 p/unit
You now receive 100 units of an item at 0.10c p/unit, note the cost below;
Then you buy 50 units at 8.50 p/unit, you will note cost does not change;
You now sell 20 units at 0.50c p/unit the following happens on general ledger;
Using this method, you will notice that unless you do a cost adjustment the item will remain at given cost, irrespective of GRV costs.
So now that you understand the 3 different methods, here is hoping you implement the strategy and methods internally with better ease and understanding.