Overview of Weighted Average Cost

Created by: David Joyce

? Overview

This training explains the new Weighted Average Cost (WAC) functionality in Turbo Inventory and how it improves:

• Inventory valuation
• Margin accuracy
• Profit reporting
• Batch costing
• Manufacturing cost tracking

Weighted Average Cost is especially useful when:

• Inventory items are identical or blended
• Individual unit costs cannot easily be assigned
• Purchase costs fluctuate over time

? What is Weighted Average Cost?

Weighted Average Cost is calculated as:

Weighted Average Cost=Cost of Goods Available for SaleNumber of Units Available for Sale\text{Weighted Average Cost} = \frac{\text{Cost of Goods Available for Sale}} {\text{Number of Units Available for Sale}}Weighted Average Cost=Number of Units Available for SaleCost of Goods Available for Sale

It provides a rolling average cost for inventory items as stock is purchased or manufactured.

⚙️ Enabling Weighted Average Cost on Products

Step 1: Open Product Maintenance

Navigate to:

Stock → Products

Select the product you want to configure.

Step 2: Change the Costing Method

Inside the product settings:

• Locate Costing Method

• Change from:

  • Last Cost

• to

  • Weighted Average Cost

Important Note

If the product has only been purchased once:

• The Last Cost
• and Weighted Average Cost

will initially be the same.

Once additional purchases occur at different prices, the weighted average will automatically recalculate.

? Weighted Average Cost in Manufacturing & Purchasing

Turbo tracks Weighted Average Cost in two areas:

1️⃣ Product Level

Used when:

• Buying standard inventory items
• Tracking general stock valuation

Example:

• Coffee beans
• Air filters
• General consumables

2️⃣ Batch Level

Used when:

• Manufacturing products
• Tracking fluctuating raw material costs
• Managing serialized or lot-tracked inventory

Example:

• Wood purchased this week costs more than wood purchased last month
• Different production batches therefore have different costs

Turbo tracks:

• Batch costs
• Product costs
• Manufacturing input costs

independently for maximum costing accuracy.

? Batch Cost Tracking

Navigate to:

Stock → Batch Inquiry

You can now track:

• Weighted Average Cost per batch
• Unit cost
• Costing method
• Historical cost changes

? Sales Orders & Invoices

When adding products to:

• Sales Orders
• Sales Invoices
• Quotes

Turbo uses the current Weighted Average Cost.

Important Behaviour

If multiple batches are selected on a sales document:

• Each batch may carry a different cost
• Margins are calculated more accurately

This gives:
✅ More accurate product profitability
✅ Better margin reporting
✅ Improved inventory valuation

? Goods Receipts & Supplier Invoices

Goods Receipt Stage

When stock is booked in:

• Inventory quantity updates immediately
• Weighted Average Cost does not update yet

Supplier Invoice Stage

When the supplier invoice is entered:

• The actual supplier cost is applied
• Weighted Average Cost recalculates automatically

? Permission Advantages

Users booking goods in:

• Do not need access to cost prices
• Can complete goods receipt processes normally

Turbo retrieves the final cost directly from:

• Supplier Invoice processing

This improves:

• Security
• Cost control
• Workflow separation

? Continuous Cost Recalculation

Weighted Average Cost is ideal for:

• Perpetual Inventory Systems

The average cost is continuously recalculated whenever:

• New purchases are made
• Supplier invoices adjust costs
• Manufacturing batches are completed

? Inventory Valuation Improvements

Turbo now improves inventory valuation reporting by:

• Breaking inventory into individual lots/batches
• Tracking:
  • Batch costs
  • Serial tracked material
  • Heat tracked material

This gives:
✅ Full lot valuation visibility
✅ More accurate stock reporting
✅ Better audit tracking

? Accounts Package Integration

When inventory transactions transfer to the accounts package:

• The current Weighted Average Cost is used as the Cost of Sales value

This provides:

• More accurate gross profit
• More realistic margins
• Improved financial reporting

? Additional Features

Users can also:

• Filter lists by Weighted Average Cost
• View costs by location
• Display:
  • Average Cost
  • Unit Cost
  • Costing Method

within product and batch inquiries.

✅ Key Benefits

✔ More Accurate Margins

Track true product profitability even when purchase costs fluctuate.

✔ Better Manufacturing Costing

Reflect changing raw material costs in finished goods.

✔ Improved Inventory Valuation

Lot-level tracking provides detailed inventory costing.

✔ Enhanced Financial Accuracy

Accurate Cost of Sales postings improve profit reporting.

✔ Real-Time Cost Updates

Costs continuously recalculate as inventory changes.

? Summary

Turbo Inventory now allows products to actively use:

• Weighted Average Costing

instead of simply calculating it in the background.

This enhancement provides:

• Better inventory accuracy
• Better manufacturing visibility
• Better financial reporting
• Better operational decision making