Weighted Average Costs Business Rules

The following business rules apply to Weighted Average Costs:

• For Receipts: AverageCost = ((OldAverageCost * OHQ) + (UnitCostOfReceipt * QuantityReceived)) / (OHQ + QuantityReceived)

• Average cost is calculated when items are received into inventory.  

• The weighted average cost is based on the quantity for that Material Item in the entire segment, not just the quantity in a particular warehouse.

• OHQ = On Hand Quantity for item in all warehouses.

• For Quantity Adjustments: AverageCost =( (OldAverageCost * QuantityReceived) + (OldAverageCost * OHQ) – (OldQuantityReceived * UnitCost) + ((OldQuanityReceived – NewQuanityReceived) * UnitCost) ) / (OldQuantityReceived – NewQuantityReceived + OHQ).

• For Unit Cost Adjustments: AverageCode = ( (OldAverageCode * QuantityReceived) + (OldAverageCode * OHQ) – (QuantityReceived * NewUnitCost) ) / OHQ.