Following are actual cost calculation methods:

1. Period Weighted Average Cost (PWAC)

This is the strict average cost of the raw material during the period, based on the total estimated receipt (or invoiced) price for the entire inventory quantity. The period weighted average cost is a strict average cost for the period based on Period Total Quantity and Estimated or Final Prices.

PWAC is calculated by dividing — the sum of the transaction quantity multiplied by price — by the sum of transaction quantity, as shown in the following illustration:

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Where:

Trans Qty – Receipt Quantities or AP interfaced quantities within the costing period

Price – Receipt estimated prices or AP invoice final prices within the costing period

2. Period Moving Average Cost (PMAC)

OPM calculates the average cost for the period while moving previous period’s cost with last period’s inventory balance and cost:

PMAC is calculated by dividing the result of — the quantity of the prior period inventory balance multiplied by the prior period cost, plus the sum of the transaction quantity multiplied by price — by the prior period inventory balance plus the sum of transaction quantity, as shown in the following illustration.

Where:

Prior Period Inv Balance – This is the prior period inventory balance captured from the inventory period ending balances.

Prior Period Cost – The prior period actual cost component from the cost component details table.

Trans Qty – Receipt Transaction Quantities or AP Interfaced Quantities within the costing period.

Price – Receipt estimated prices or AP invoice final prices within the costing period.

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3. Perpetual Weighted Average Cost (PPAC)

The perpetual weighted average cost type computes the average cost for the entered receipts and quantities within the defined boundaries of the cost calendar. The calendar definition may in turn be identical to a fiscal year, or may span multiple fiscal years providing the flexibility of a variety of Perpetual Weighted Average cost methods.

PPAC is calculated by dividing — the sum of the transaction quantity multiplied by price — by the sum of transaction quantity, as shown in the following illustration:

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Where:

Trans Qty – Receipt Quantities or AP interfaced quantities from the start of the costing calendar to the end of the current period.

Price – Receipt estimated prices or AP invoice final prices within the costing calendar.

Last Transaction Cost

There are two methods for determining last actual cost of a raw material:

LSTT – This method uses the last transaction within the costing period, regardless of whether the transaction is a receipt or an Accounts Payable invoice.

LSTI – This method uses the last Accounts Payable Invoice transaction within the costing period, even if there are latest receipts with estimated prices. In the absence of AP invoice transactions the latest receipt will be considered for the actual cost.

Last transaction cost adjustments will superseded any other transaction for the actual cost. For both methods, the adjustment unit cost is the actual cost.

Last Transaction (LSST) – OPM uses the last transaction in the costing period as the basis for the raw material cost (if there is no Accounts Payable invoiced cost for the period, the last receipt price is used to cost the raw material).

Last Invoice Transaction (LSTI) – OPM uses the last Accounts Payable invoice transaction in the costing period as the basis for the raw material cost, even if there are raw material receipt transactions that occur later in the period. If there are no Accounts Payable invoiced costs for the period, the last receipt price is then used to cost the raw material. Actual cost adjustments supersede any of the methods used to calculate actual cost – an adjusted cost is the actual cost.
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