Average Costing VS Periodic Average Costing(PAC)

Average Costing
------------------------

Cost Management User's Guide:
    average cost =
      (transaction value + current inventory value) /
      (transaction quantity + current on hand quantity)


Item AS5489   Period March 2013

Organization M1

1. PO Receipt #1 10@$100
   Average Cost : $100
2. Sales Order issue qty 2 issued at $100
3. PO Receipt#2 10@$120
   Average Cost: 8@100 + 10@120/18 = 111.1111
4. Sales Order issue qty 5 issued at $111.1111

Organization M2

1. PO Receipt#3 10@$130
   Average Cost $130
2. AP Invoice 6@$150
3. Sales Order issue   qty 5 issued at $130
4. PO Receipt#4 10@$120
   Average Cost: 5@130 + 10@120 / 15 = 123.3333
5. Sales Order issue   qty 7 issued at $123.333


Assumptions:
On hand balance : 0
WMS not enabled, so item cost is held at organization item level.

Average Cost at M1 and M2  are different.  
M1 Item Cost $111.1111;  M2 Item Cost $123.333