The warehouse value of your products is calculated as the product of current inventory and the average cost price. This is a standardized method for determining your warehouse value in the event of potentially changing purchase prices.
The average cost price is the unit price of a product in your warehouse. This value only changes when the goods inventory increases. In this case, the current net purchase price is selected and adjusted proportionally.
Example:
- The opening inventory of a product is 10.00 and the net purchase price is 12.50. The average cost price is 12.50 and the warehouse value is accordingly 125.00.
- Two months later, the inventory is increased by 2 through goods receipt at an updated net purchase price of 15.00. The average cost price is now calculated as follows:
Previous warehouse value + number of new products * current net purchase price ------------------------------------------------------------------------------- new inventory = (125.00 + 2 * 15.00) / 12 = 155 / 12 = 12.92The new warehouse value is 155.00.
- By selling one product, the inventory is reduced to 14. The average cost price remains the same. The warehouse value is: 14 * 12.92 = 180.88
The purpose of the average cost price is to reflect a realistic - tax-relevant - value of the warehouse. Through further goods receipts, the average cost price continuously approaches the current net purchase price.