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Average cost calculation on Item

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Posted on by October Sky

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Hello

I am attempting to understand why the average cost of an item might be pulled through automatically when a new purchase order (or sales order) is created for the item. Surely, the price would be determined by what the vendor's price is.

What is the benefit of calculating the average cost of an item in this case?

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Dynamics 365 Business Central

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Valentin Castravet 31,481 Super User 2025 Season 2 on at

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Are you referring to the unit cost that the system populates for the item on the purchase order? If so, that cost is the most recent direct cost from the item card, not the average cost. For more information, check out this article: Unit Cost Fields on the Item Card in Dynamics 365 Business Central - Dynamics 365 Business Central Insights

If you want to override that cost, you can set up special prices on the item card for each specific item and vendor combination."

Valentin Castravet
Work: Zander ERP Services
Blog: Dynamics 365 Business Central Insights
LinkedIn: www.linkedin.com/in/valentin-c-0500a247/

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PRao 394 on at

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Is the unit cost you're mentioning the one the system displays for the item on the purchase order(Direct Unit Cost Excl. Tax) ? If so, this cost is derived from the most recent direct cost ( Last Direct Cost) on the item card, rather than the average cost. Direct Unit Cost Excl Tax. field value is auto populated from Last Direct Cost field from item card in respect to Unit Cost.

The Average Cost method in Business Central calculates the cost of inventory by taking the weighted average of all inventory purchases. When items are sold, the cost of goods sold (COGS) is determined using this average cost.

Refer the screenshot as below.

Thanks,

PRao

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YUN ZHU 95,729 Super User 2025 Season 2 on at

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Valentin is right, this is the lowest risk option for the system, automatically taking the cost of the last posting. For example,

If you do not want to use this value, please maintain the price master data.

Thanks.

ZHU

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