How is Cost Calculated on AR when One Purchase is Done at a Different Cost and the Other at a Different Cost?

Created by Mubarak Waqar from Asaan Retail, Modified on Mon, 10 Oct, 2022 at 4:36 PM by Mubarak Waqar from Asaan Retail

It's calculated using the average cost price method. 


Let's suppose we have a product named "Cricket Ball" whose cost price is currently in the system at PKR 70/-per unit (current units count in the software: 9).





Now if we create a purchase order for the same product at the cost price of PKR 80/-per unit (PO count: 6),



As you can see here, the previous cost price was PKR 70/-per unit. Now after creating the PO by PKR 80/-per unit. It changes the cost price by PKR 74/-per unit by using the average cost price method.



Calculations for the average cost price method: 


Previous 9 units at a cost of PKR 70/- each (9x70= PKR 630/-)


New inventory has been added to the software by the purchase order of 6 units at a cost of PKR 80/-per unit (6x80 = 480/-) 


The current inventory count is 15 in Asaan Retail, whose total worth is (630+480 = PKR 1110/-). Just divide the total amount by the current sellable units (1110/15 = PKR 74/-per unit). 


That's how Asaan Retail works for the purchase orders at the different cost prices.




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