Which Costing Methods does Pulse Commerce support for Products?

Costing Method Refers to the calculations used to determine the value (cost) of inventory.

The following item/product costing methods are offered by Pulse Commerce:

Fixed Cost: When creating a product, select option Fixed Cost for Costing Method.

Fixed Cost allows you to define the inventory cost you want to capitalize on your balance sheet and then capture variances between the capitalized costs and the actual costs incurred.



With Fixed Cost, once the cost is assigned to an SKU, it remains same when an order is placed. When inventory adjustment is done or when PO is received.
In short, cost does not change with any product related transaction.  

Average Cost: the average cost at any time is the average of the cost of the available inventory. The average cost is computed by dividing the total cost of goods available for sale by the total units available for sale.



When creating a product, select option Average Cost for Costing Method.

The Costing is calculated using the following formula:

Avg. Cost = [(Cost*Qty On hand) (New Cost*New Qty)]/(Qty On hand New Qty)

For a product with average costing method, the cost will be changed when an order is fulfilled or if an inventory adjustment is done or when a PO is received.

For Example:
Consider SKU: 147ABL7306-1XL-AQUD - An item with costing set as Average Cost.

First inventory adjustment is done for qty=10 and the cost is 32.56.

In Products > Inventory Manager > Product Editor > Simple Tab you can see system updates the cost as 32.56

Now a PO with cost as 22.36 and qty as 10 is created. Once the PO is received the system will reevaluate the product cost:

Avg. Cost = [(Cost*Qty On hand) (New Cost*New Qty)]/(Qty On hand New Qty)
Avg. Cost = [(32.56*10) (22.36*10)]/(10 10)
Avg. Cost = [(325.6) (223.6)]/(20)
Avg. Cost =27.46

Thus when an inventory adjustment/inventory transfer/PO/Sales Order/All such transition are received, the system will recalculate the cost for an item with average costing method.

Import:
Product Import & Customer Group Pricing Import will impact an item that has Fixed Cost method. 

Product Warehouse Import - Will impact item that has Fixed Cost method. 

Inventory Import - This import allows you to update cost in case of average cost items.

Note: Pulse Commerce does not support Changing Cost Method. In order to change the cost method, it’s advisable to close the existing item and recreate with a new method.