# Costing Method

Created by Eugene Lum, Modified on Tue, 31 May 2022 at 06:11 PM by Eugene Lum

SCENARIO

In QNE, users can set a costing method according to their preference to calculate their stock’s cost. System will auto update from the first date until the current date transaction with the new costing method.

There are a total of 4 stocks that can be selected which are, Weighted Average, FIFO, Fixed Cost, and Last Purchase.

Note: System will auto update from first date until current date transaction with new costing method.

SOLUTION:

1. To check which costing method are using, you can go to Maintenance> System Options> Stocks

2. To select or edit costing method, you can click on the arrow and select your desired costing method. Click Save after select or change costing method.

How to check unit cost by using Stock Inquiry

1. Go to Inquiry> Stock Inquiry

2. Select for specific stock and time period

3. Select Costing tab and click Inquiry

Here is the explanation with examples for each costing method.

1. Weighted Average

The weighted average cost is a method to calculate the average unit cost of an item.

For example, a manufacturer purchases 100 units of ITEM A with RM100 on 1 JANUARY. After that, the manufacturer purchases ITEM A again with RM200 for 1 unit on 1 FEBRUARY, RM500 for 1 unit on March.

 DATE QUANTITY UNIT PRICE 1 JANUARY 1 RM100 1 FEBRUARY 1 RM 200 1 MARCH 2 RM 500

By using weighted average method to calculate the unit cost,

[(RM100x1) + (RM200x1) + (RM500x1)]/ (TOTAL QUANTITY) = RM266.67

When we check the unit cost by using stock inquiry, system will show latest unit cost as RM266.67

2. FIFO

FIFO stands for First In, First Out. The FIFO method assumes that the oldest products in a company's inventory have been sold first.

Example,

A manufacturer purchases 1 ITEM BBB for RM10 on January

In February the manufacturer purchased it again for RM20 and RM30 for the third time with 2 units in March.

 DATE QUANTITY UNIT PRICE UNIT COST 1 JANUARY 1 RM10 RM 10 1 FEBRUARY 1 RM 20 RM 20 1 MARCH 2 RM 30 RM 15

When we stock inquiry on 31 MARCH, we can see that the ITEM BBB is sell the first item which unit cost RM10, come with second item RM20 and third item RM15. System will display the latest item on top and oldest at the bottom which are going to sell first.

When we check the stock inquiry for 30 APRIL, we will see that the manufacturer only left one stock which unit cost is RM15.

3. FIXED COST

Fixed unit cost is the purchase price that is based on your setting at stock item. For example, when you key in RM10 for ITEM C it will show the unit cost as RM10.

Let’s say we purchase with RM15 for an ITEM C on 27/5, but the unit cost will still show RM10 as unit cost.

 DATE PURCHASE PRICE UNIT COST 1/1 RM 10 RM 10 27/5 RM 15 RM 10

4. LAST PURCHASE

Unit cost based on your last purchase price. For example, a manufacturer purchases 1 unit of ITEM A with RM200 on 1 APRIL. So, the unit cost will be RM200.

After that, the manufacturer purchases 1 unit again with RM500 on MAY and this time the stock unit cost will be RM500.