Costing Methods (continued)
Purchase Order Receipts
The receipt of parts on a Purchase Order affects the Average Cost when a part is ordered at a cost that is lower or higher than the current average cost in the warehouse. When the Purchase Order is received, the part unit cost is used to debit the inventory. If the part cost on the Purchase Order is lower or higher than the current average cost in the warehouse at the time of the receipt, the average cost will be recalculated and decreased or increased to a new average cost.
For example, a Purchase Order was created for a part with the amount of $.80/ea. At the time the Purchase Order was created, the current average cost of the part in the warehouse was $1.00. After the part on the Purchase Order was received, the new average cost of the part in the warehouse is calculated as $.90.
Issuing Parts to a Job or Service Ticket
When parts are issued from a warehouse, the cost applied to the Job or Service Ticket is the current average cost at the time of the transaction.
If parts for a Job or Service Ticket are ordered on a Purchase Order, received in and issued immediately (option on the Parts Receipt), the cost applied to the Job or Service Ticket is the Purchase Order receipt cost. If those same parts are received into a warehouse then issued as a separate transaction, the issue transaction will be calculated at the current average part cost in the warehouse.
Returning Parts to Stock
When parts are returned to stock from a Job or a Service Ticket, the original issue cost is used for the return transaction, provided the Job or Service Ticket number is referenced on the return transaction. If parts are returned to stock not referencing a Job or Service Ticket number, the current average cost in the warehouse is used for the transaction.
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