How Does The Option of Weighted Average Cost Work?
You can activate the weighted average cost option on the General page under Store setup.
If it is unticked (unchecked), the option is deactivated and your store is currently calculating cost based on the latest cost set on the product's profile page, as shown in the image below. If it is ticked (checked), your store is calculating the average cost based on the weighted average cost matrix.
Please note: we recommend not to change this setting once it's set up. It may mess up the data in the sales report if you change it back and forth.
How is the weighted average cost calculated?
The weighted average cost will be calculated based on the initial inventory, the cost of the initial inventory, the purchased quantity in the purchase order and the purchase cost in it. Here's an example of how it's calculated for Product A.
Transaction | Date | Quantity Changed | Cost Entered | Purchase Cost In Sales Report | Total Cost |
Initial inventory | 1 January | +8 | $100 | $800 | |
Sale | 1 January | -1 | $100 | $700 | |
Sale | 2 January | -1 | $100 | $600 | |
Purchase | 3 January | +10 | $60 | $1200 | |
Sale | 3 January | -1 | $75 | $1125 |
- Product A is created on the 1st of January, with the initial stock as 8, and the cost as $100.
- When you sell one Product A on the 1st of January, the purchase cost in the sales report will be recorded as $100.
- Then, you change the cost of Product A in the product details page to $80, and sell another Product A on the 2nd of January. The purchase cost in the sales report will remain unchanged. It will be recorded as $100, rather than $80.
- You process a purchase order of Product A, buying 10 Product As at $60, and receive it on the 3rd of January. The purchase cost will be updated. When you sell a Product A, the purchase cost will be recorded as $75 = ($100 * 6 + $60 * 10) / (6 + 10).
Will this impact the way I use Hike if the weighted average cost is activated?
To ensure that the feature works properly, you may get a warning when using the following features.
- Editing cost in the product's profile page manually, in bulk via importing, or by 3rd-party integrations.
- Adjusting inventory in the product's profile page manually, in bulk via importing, or by 3rd-party integrations.
As you may understand, the calculation of the weighted average cost depends on the inventory and the cost value. It will work effectively only if cost and quantities are streamlined with purchase orders. Manually updating cost or quantity may lead to miscalculation of the weighted average cost.
Exporting the details about the Average Weighted cost of each product via an Excel file:
We’re excited to announce a new update in Hike POS: you can now view the Average Weighted Cost directly in the Product Export Excel file!
If the Average Weighted cost option is selected on the General settings page, your product export file will include a column with each product's Average cost price.
Simply
go to:
Products > Export > Product List
Download the export file, and you’ll find the "Average
Weighted Cost" column included alongside your existing
product data.
Related Articles
Setting Tax Option for Cost in Purchase Orders
You can set up the tax option for purchase cost in a purchase order easily in Hike. You would first need to confirm whether the product cost on the product page, as shown below, is the tax-inclusive or tax-exclusive one. To set this up, please ...Explore Product History
Product history is where you can check the inventory change of a particular product. It's a log recording the inventory change and how it was caused. Please note, as it records the inventory change, so you will not be able to find any product history ...FAQ on Integration with BigCommerce - Products
Hike allows you to set up the integration with BigCommerce. Regarding how to set it up, please refer to How to integrate BigCommerce with Hike. In this article, we will answer some of the questions frequently asked about syncing products with ...FAQ on Integration with Shopify - Products
Hike allows you to set up the integration with Shopify. Regarding how to set it up, please refer to How to integrate Shopify with Hike. In this article, we are trying to answer some of the questions frequently asked about the product syncing with ...Configuring your Store Settings
Once you have signed up to Hike and entered in your store details, the first thing you’ll want to do is configure your store settings. This means, going through the various settings as set by Hike, to get your store ready. This includes things such ...