Cost Method

Cost Method is used to determine the cost of an item when calculating cost of good sold and the dollar value of inventory. Cost Methods are Average Cost or Standard Cost.

If an item has a Cost Method of Standard Cost, the user entered Unit Cost is used to determine cost of good sold and inventory value for the item.

If an item has a Cost Method of Average Cost, the system calculated Average Cost is used to determine cost of good sold and inventory value for the item.  Each time the item is received into inventory, the quantity and total dollar value are added to the existing quantity and total dollar value to calculate a average cost per item.