Odoo product costing Methods - How Define
Odoo 11 has three types of costing method:
The standard price method doesn't affect the cost price of the product according to the purchase or other inventory adjustments. The cost price usually needs to be changed manually, in case of products costing method is the standard price.
When we set standard price in the product category we have to enter Cost price manually selected category for a standard price.
The average price costing method different the cost price according to the total quantity shipped and the purchase price. The cost price is actually dynamically calculated and we did not need to specify the cost price in case of the costing method average price selected. The cost is calculated on the total average price according to the quantity.
Average costing method is used in a periodic inventory system, the cost of goods sold and the cost of ending inventory is computed using weighted average unit cost. average unit cost is computed using the following formula:
Average Cost =
FormarQty * FormarAvg. Cost + Incoming Qty. * Purchase Price / Final Qty
This price is calculated at the time of shipment and its corresponding invoice is confirmed.
Average Cost Example:
|Operation||Delta Value||Inventory Value||Qty On Hand||Avg Cost|
|₹ 0||0||₹ 0|
|Receive 4 Products at ₹ 10||+4*₹ 10||₹ 40||4||₹ 10|
|Receive 2 Products at ₹ 15||+2*₹ 15||₹ 30||6||₹ 5|
|Deliver 5 Product||-5*₹ 5||₹ 5||1||₹ 5|
At the starting, the Avg Cost is set to 0 and set there is no product in the inventory. When the first reception is made, the average cost becomes the purchase price.
In second shipment receipt, the average cost is updated because the total inventory value is now ₹ 40 + 2*₹15 = ₹ 30 As we have 6 units on hand, the average price per unit is ₹ 30 / 6 = ₹ 5
Next is the delivery of 5 products does not change the average cost. So, the inventory value is now ₹ 5 as we have only 1
unitsremaining of each ₹ 5 / 1 = ₹ 5
The widely used costing method, which actually updates the cost price of the product according to the last outgoing product in inventory. So the removal strategy like LIFO, FIFO, has a main role in this method. The cost price of the product doesn't changes until a product is removed from inventory by any of the removal strategies.
It is a very powerful method to Implement FIFO, LIFO, and FEFO Delivery policies. And its working fine in all the scenario including landed cost calculation.
The field is enabled to enter the cost price of the product and it will appear in sales order to calculate sales order margin. But the actual cost of goods calculation will be based on the Delivery Removal Strategy (FIFO /LIFO /
FEFO) in Anglo Aaxson Accounting System.
Real price the costing is further refined by the removal strategy FIFO by default.
Now we selected the removal strategy as LIFO [Last in First Out] Method. cost price is ₹0 and 0 product in hand. So let's do the two purchase with the unit price ₹20 for 10 products and ₹10 for the 5 products respectively.
Purchase for 5 products with ₹20 unit price and its inventory value.
After the first purchase, the inventory value is 100 for 50 products with ₹20.
Now the product is updated with 5 on hand but the cost price is not changed.
Another purchase and receive of 5 products with ₹10.
After another purchase, the inventory values are updated as (₹20 * 5 ) + (₹10 * 5).
The cost price of the product doesn't get updated where no outgoing of the product is done. So let's make a sale of the real product of quantity 4 and check what the changes are taking place.
Sale 4 real products and t deliver:
The quantity on hand is updated with 6. Where we sell 4 from 11 products. The cost price is Updated with ₹10 where these sold products are triggered as per LIFO strategy and taken the unit price of last outgoing product ₹10 from the last purchase.