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The following tabs include 1) the required Soft1 configuration, according to the selected Valuation Method, 2) detailed examples per calculation method of cost price, 3) the management of Cost Groups, 4) jobs & reports, which offer the user information related to the Inventory Valuation.
To evaluate/ calculate the Inventory Cost, you can proceed as follows:
In Company' s Warehouses (W/H),
activate the "Include in cost price calculation" parameter to calculate/ modify the cost when transactions are made from/ to specific W/H.
include each W/H in Cost Groups, only if the items/ goods valuation shall be performed across the Warehouses included in Cost Groups. See more in Cost Group tab.
In Stock Management Parameters,
- Set/ define the Valuation method.
- Activate the "Cost per Group" flag only if the items/ goods valuation shall be performed across the Warehouses included in Cost Groups. See more in Cost Group tab.
- In case you select one of the FIFO/ LIFO or Last purchase price as a valuation method, then you should define how the calculation shall be performed. See more in Valuation methods - Results tab.
- Activate the "On-Line cost price calculation" flag to automatically modify/ calculate the items' cost based on each transaction (Refers to all valuation methods, for commercial companies, except FIFO & LIFO). Alternatively, you should use the Cost price calculation Soft1 job. See more at Costing jobs tab.
At Transactions Design (Inventory) the Update data should be adjusted according to the selected Valuation Method. See at Valuation Methods - Examples tab how the inventory transactions affect the calculation of cost prices.
Soft1 default configuration offers a range of ready-made Inventory Transactions, at Document Types, which can be directly used to post/ save Documents and therefore to check the resulting cost. Read here for the Transactions.
See below, in detail for each valuation method, examples regarding the Inventory Valuation.
Download the Cost Prices_examples_ver.09.1113.xls file, which also includes some indicative examples.
To perform goods/ stock valuation, using the Standard Cost method, define the standard cost at each item/ product tab (Accounting tab).
You should acknowledge that:
- The Standard Cost is exclusively calculated/estimated by the company, not by Soft1. In other words, if the Standard Cost is selected as a valuation method, no calculation is performed in Soft1, no matter how many transactions are made.
- If the Standard Cost is different per period/ month then you should define it at the respective table.
- You may set the Standard Cost, either manually or/and using some of the Soft1 available methods of data import.
Standard Cost & Production Costing
If you use Soft1 to monitor the company's production process, you should be aware of the following:
- In case the waste/ scrap is monitored as a by-product (separate/individual Stock Item), then it will be exclusively evaluated according to the Standard Cost, as it has been set at each by-product profile card (Accounting tab).
- Regarding the by-products, which are included in the production costing process and are evaluated according to the standard cost, the total production value is subtracted from the overall production cost. You should have previously defined the cost rate at the by-products grid upon designing Bills of Materials (BOMs).
When calculating the goods/ stock valuation by using the Annual Weighted Average method, Soft1 includes the document transactions, which affect:
- the Invoiced [In] qty
- the Invoiced [In] value
Calculation formula:
Use Cost Prices (tab) from Item Financial Data (Related Job) in order to see how the item's cost has been calculated according to the transactions/ documents created in Soft1.
You may verify the result by using:
- the information in Period data > Purchases/Sales.
- the data in Item Transactions (Related job)
See the example below:
| Period | Calculate | Result | Comments |
|---|---|---|---|
| Op. Balance | 7.464,29 / 550 | 13,5714364 | |
| January | 13,5714364 | No transaction within this month. | |
| February | (7.464,29 + 3.750) / (550+300) | 13,1932824 | |
| March | 13,1932824 | No transaction/ Purchase within this month. | |
| April | 13,1932824 | No transaction/ Purchase within this month. | |
| May | (7.464,29 + 3.750 + 750 ) / (550 + 300 + 60) | 13,1475714 |
When calculating the goods/ stock valuation by using the Monthly & Quarter Weighted Average method, Soft1 includes the document transactions, which affect:
- the Invoiced quantity of Imports (Invoiced [In] Qty)
- the Invoiced Value of Imports (Invoiced [In] Value)
- the Invoiced Quantity of Exports (Invoiced [Out] Qty) - adjust the balance
Calculation formula:
or
The above-described calculation formulas apply also for calculating the Quarter Weighted Avg including the cost price of the previous quarter in the calculation.
For example, if you want to calculate the cost for February then:
- the previous period balance refers to both Opening Balance and January.
- the previous period cost price refers to Op. Balance (period).
- the Total quantity of previous period refers to Op. Balance (period).
- the Invoiced In Values refers to both January and February.
- the Invoiced In Qty refers to both January and February.
The resulting cost price will be the same for both January and February.
Respectively, for April, the calculation will include the cost price of the previous quarter, which should be the same for January, February and March.
Use Cost Prices (tab) from Item Financial Data (Related Job), in order to see how the item's cost has been calculated according to the transactions/ documents created in Soft1.
You may verify the result by using:
- the information in Period data > Purchases/Sales.
- the data in Item Transactions (Related job)
See the example below:
| Period | Calculate | Result | Comments |
|---|---|---|---|
| Op. Balance | 9.500,00 / 700 | 13,5714286 | |
| January | 7.464,29 / 550 | 13,5714364 | The value as transferred from the previous period is always included for calculation. |
| February | [((550-490) * 13,5714364)) + 3.750 / (550-490)+300 | 12,6785727 | |
| March | 12,6785727 | ||
| April | 12,6785727 | ||
| May | (360 * 12,6785727) / 360 | 12,6470599 | |
| 12,6470599 |
The Last Purchase Price can be found/ located at the most recently created Purchases document in Soft1. In case there are 2 transactions/ documents within the same date, then the price of the most recently created Purchases document will be be taken into account.
The specific price will concern the Cost price provided that at Purchases Document transaction, the option Last Purchase Price has been activated at Update Prices parameter.
At Stock Management Parameters,
- Define/ Select the Last purchase price as a stock valuation method, and
- select which price will be considered by Soft1 as the Last Purchase Price.
- The Nominal Price shall be the price of the item at Purchase Document line.
- The Value w/o discounts shall be the item's price at Purchase Document line subtracting any possible discounts (any discounts in lines or/and in totals that affect the lines). Basically, it is the result of the mathematical operation: Line value/ Line Qty, since the discounts affect the Values, not the Prices.
- The Value incl. discounts and expenses is the item's price at Purchase Document line subtracting any possible discounts (any discounts in lines or/and in totals that affect the lines) adding though any potential charges/ expenses. Basically, it is the result of the mathematical operation: Line value/ Line Qty, since the discounts and surcharges that affect the Values, not the Prices.
Use Cost Prices (tab) at Item Financial Data (Related Job), in order to see how the item's cost has been calculated according to the transactions/ documents created in Soft1.
You may verify the result by using the data in Item Transactions (Related job) provided that at the transactions of most recent Purchases Document, the option Last Purchase Price has been activated at Update Prices parameter.
When calculating the goods/ stock valuation by using the Moving Avg, Soft1 takes into account the document's transactions which are similar to Monthly Avg:
- the Invoiced Quantity of Imports (Invoiced [In] Qty)
- the Invoiced Value of Imports (Invoiced [In] Value)
- the Invoiced Quantity of Exports (Invoiced [Out] Qty)
Calculation formula:
It is calculated in the same way as the Moving avg. The only difference is that the calculation is not performed through the twelve-month period but through the Item Financial Data (Related Job). All transactions of the selected period are included, for which the Invoiced Purchases/ Sales Qty is different to zero.
[(Previous Total Quantity * Previous Moving Avg) + Transaction In Value] / (Previous Total Quantity + Invoiced Quantity of Purchases transactions).
Previous Total Quantity = (Progressive Total of Invoiced Purchases Quantities of Previous transactions - Progressive Total of Invoiced Sales Quantities of Previous transactions)
The monthly cost price is the one modified by the last transaction of the month.
When calculating the stock value, by using FIFO (first in–first out) method or LIFO (last in–first out) method, Soft1 includes the document transactions that affect the aggregates with the Invoiced In/ Out Qty and Value or the Inventory [In]/ [Out] Qty & Value.
At Stock Management Parameters:
- Define the FIFO or LIFO, as a valuation method, and
- Select based on which aggregates at Inventory Transactions, the calculations shall be performed.
FIFO example
Calculation formula
All invoiced In quantities and values are selected and successively the invoiced Out quantities are removed/ subtracted based on date (starting from the oldest entry).
Provided that the invoiced export quantities are subtracted, the balance of each import quantity is multiplied with the value of import and their sum is divided by the total quantity balance.
Example:
The first 300 sold pieces are subtracted from the 1st import.
The next 500 sold pieces are subtracted from the 2nd import. The 2nd import consists of 1.500 pieces so the balance quantity is 1.000 pieces.
The 600 sold pieces are also from the 2nd import. The balance quantity of the 2nd import is 400 pieces.
The 200 sold pieces are also subtracted from the 2nd import. The balance quantity is 200 pieces.
Calculate the cost price as follows:
(200 * 24,43) + (200 * 24,62) + (300 * 24,13) + (200 * 24,01) + (600 * 23,15) /1.500 (qty balance) = 23,827333
Configuration
The document types that should participate in the calculation of cost prices should have the following fields updated at the Inventory Transactions:
- Invoiced imports quantity (for imports documents)
- Imports Value (for imports documents)
- Invoiced Export quantity (for exports documents)
►Info: At items with FIFO valuation method, and no transactions within the fiscal year, but they have op. balance value, then this value is considered as a cost price.
►Info: If there are discount credit notes, then they should be matched.
LIFO example
Calculation formula
All invoiced In quantities and values are selected and successively the invoiced export quantities are subtracted based on date (starting from the oldest entry).
Provided that the invoiced export quantities are subtracted, the balance of each import quantity is multiplied with the value of import and their sum is divided by the total quantity balance.
Example:
The first 300 sold pieces are subtracted from the last import.
From the next export (500 pieces) the 300 sold pieces are subtracted from the last import and the next 200 sold pieces are subtracted from the 5th import.
The 600 pieces are subtracted from the 4th, 3rd and 2nd import. At 2nd import, the balance is 1.400 pieces.
The last 200 pieces are subtracted from the 2nd import, then the balance quantity is 1.200 pieces.
Calculate the cost price as follows:
(1.200 * 24,43) + (300 * 23,29) / 1.500 (quantity balance) = 24,202
Configuration
The document types that should be included/ participate in in the calculation of cost prices should have the following fields updated at the Inventory Transactions:
-Invoiced Quantity of Imports (for imports documents)
- Value of Imports (for imports documents)
- Invoiced Quantity of exports (for exports documents)
Cost Groups allow you to create separate Cost entities in the company by grouping the Warehouses. Therefore, the stock valuation will result based on the transactions performed in the Warehouses. which participate in the same Group (e.g. for companies that own warehouses in several geographical locations to have different cost prices at these areas/ locations. It shall be pointed out that there might be different cost transfer affecting the prices of the goods.
The same Valuation Method shall be used for all Cost Groups.
Configuration
At Stock Management Parameters,
- Define the Valuation method of stock items.
- Activate the "Cost per Group" flag/ option only if the items/ goods valuation shall be performed across the Warehouses included in Cost Groups.
- Activate the "OnLine cost price calc." flag/ option to automatically modify/ calculate the items' cost based on each transaction. Alternatively, you should use the Soft1 Cost Price Calculation job. See more at Costing Jobs tab.
Design the Cost Groups (menu Commercial Management > Stock Management > Cost Prices > Cost Groups)
At Company's Warehouses (W.H.),
- include the Warehouses in Cost Groups, to perform the valuation of stock/ goods in the W.H. included in the Group.
activate the "Include in cost price/ calculation" flag/ option to have the cost calculated/ modified by the transactions made from/ to specific W.H.
Example: The Company owns three Branches (Dublin, Limerick, Waterford) with two Warehouses each (the Branch and its Warehouse)
Example
The following example is based on this scenario:
- The Company uses the Annual Weighted Avg as a valuation method and owns three Branches (Athens, Thessaloniki, Crete) with two Warehouses each (the Branch and its Warehouse).
- The Company's suppliers send the goods to the Athens Branch (Warehouse) and the goods are distributed from Athens to the Warehouses of the rest of the Branches (Thessaloniki, Crete). The Company needs to monitor the cost of the goods owned at every Branch separately.
See the transactions below according to the order they are made/ performed, (screen examples from Item Transactions (Related Job).
- Purchase goods from Dublin- warehouse (e.g. Purchase Invoice - Delivery Note - ΑΤΔΑ01112018)
- Send goods to Limerick and Waterford Branches (e.g. Invoice - Delivery note (Sales) - ΑΑΔΑ000001 & ΑΑΔΑ000001)
Receive goods in Limerick and Waterford Branches (e.g. Receipt Notes (Sales) - 7046000001 & 7047000002)
Provided that the Receipt Note transactions update the Warehouse, the Branch(es) should be also updated of the cost of the goods.
- Goods distribution between the Branches' Warehouses (e.g. Delivery note - Internal trans. (Stock Mgmt) - ΕΝΔΣ000004)
Use Cost Prices per Group tab, at Item Financial Data (Related Job), to see how the item's cost has been calculated according to the transactions/ documents created in Soft1.
You can verify the result by using:
- the information in Period Data tab (Sales - Purchases).
- the data in Item Transactions (Related Job).
See the list of jobs & reports below including data/ info regarding the Cost Groups.
| Jobs | Economic/ Financial Indexes |
|---|---|
|
|
| Reports | Statistical Reports/ Browsers-Lists |
|
|
Jobs
- Cost Price Calculation
- Create Physical Inventory Documents
- Fifo – Lifo Calculation
- Sets/Kits Cost Price Calculation
- Costing (Cost of goods sold)
- Production Costing
- Create Physical Inventory Documents
- Inventory Balances brought fwd
Reports
- Items Trial Balance
- Stock Ledger
- Stock Ledger (extra-acc./ing 94)
- Items Detailed Trial Balance
- Items Detailed Trial Balance per W/H
- Stock Opening Balances
- Stock Opening Balances per W/H
- Monthly Inventory Report
- Monthly Inventory Report per W/H
- Items Monthly Imports
- Items Monthly Imports per W/H
Screen Forms
- Item Financial Data (Indexes),
- Item data per W/H
Indexes
- Op. Balance Cost
- Balance Cost
- Cost of Goods Sold
- Gross profit rate
- Gross profit
Statistical
- Sales Year Overview
- Sales Overview - Comparative Analysis
- Stock Statistics (Cost Groups)
- Stock Overview - Comparative Analysis
- Purchases Overview - Comparative Analysis
- Purchases Statistics (Cost Groups)
- Purchases Year Overview
- Company View - Company Overview
If you select "Last" you will see how the cost has been modified according to the most recent calculations.
If you select "Current" you will see how the cost has been modified according to the transactions made in Soft1 in case another valuation method had been used.
