How does Imonggo compute average cost?
Initially, the average cost of an item is the same cost that the user has entered in the edit item dialog.
When the user creates a "Receive from Supplier" transaction, the average cost of an item is computed based on the value and quantity of the item received. It is a moving average computed based on historical transactions. The "Return to Supplier" transaction has the opposite effect.
- Initially, user created an item named "T-shirt" and entered $18 in the edit item dialog -> Average cost is $18
- User received 10 "T-Shirt" with cost of $20 -> Average cost is now $20
- User received another 10 "T-shirt" with cost of $22 -> Average cost is now $21
- User returned 10 "T-shirt" with cost of $22 -> Average cost will be reverted back to $20
Only "Receive from Suppler" and "Return to Supplier" affect on average cost. Any other transaction including "Adjustments" has no impact on the computation of average cost.