FIFO vs. Average vs. Standard: Decoding the Costing Code
Ever wondered how the value of the items sitting on store shelves is calculated? This isn’t just about counting boxes – businesses use sophisticated methods to determine their stock’s worth. In today’s blog, we’ll unpack the world of current stock valuation reports in Sage 200. We’ll explore what these reports are, how they work and why they’re important for any business owner. So, whether you run a corner shop or a multinational corporation, understanding stock valuation can help you keep your finances in tip-top shape!
About this report
The current stock valuation report displays your stock item levels and value at the time the report is generated.
The stock levels and value for the current stock valuation report are calculated for both confirmed stock items and unconfirmed stock items.
The stock levels and value are displayed on the report as follows:
- Quantity – This the confirmed stock level for the item.
- Quantity Including Unconfirmed – This is the confirmed stock level (Quantity) for the item, plus the unconfirmed stock level for the item.
- Value – This is the value of the confirmed stock level (Quantity).
- Value Including Unconfirmed – This is the value of the confirmed and unconfirmed stock level (Quantity Including Unconfirmed).
How the stock values are calculated
The value of a stock item is calculated differently depending on the Costing Method used for each stock item.
Standard costing method.
(Stock level) x (Standard cost price)
This uses the Standard cost price, on the stock item’s record, to calculate the value of both confirmed and unconfirmed goods.
The Standard cost price is displayed on the report as the Valuation price.
Average costing method
(Stock level) x (Average buying price)
This uses the average buying price on the stock item’s record to calculate the value of both confirmed and unconfirmed goods.
Each time a purchase invoice or an addition of stock is recorded for an item, the average buying price is updated and recorded by Sage 200 using the current system date on your PC.
The Average buying price is displayed on the report as the Valuation price.
FIFO costing method
This uses a different cost price depending on whether the goods are confirmed or unconfirmed.
For confirmed items the actual cost price is recorded against each batch or serial number.
Actual costing method (traceable stock items only).
This uses a different cost price depending on whether the goods are confirmed or unconfirmed.
For confirmed items the actual cost price is recorded against each batch or serial number.
Run the current valuation report
Open: Stock Control > Reports > Status > Valuation.
1. Use the criteria to select the stock items to include on the report.
You can select by:
Stock Item
Stock items in a warehouse
Product Group
Stock item search value
Stock item costing method
2. To run the current stock valuation report, accept the current date as the Valuation date.
3. To produce the report, click OK.
Now that you’ve explored the world of current stock valuation reports, you’ve got a better understanding of how businesses determine the value of their inventory. By utilising these reports, businesses gain valuable insights into their stock levels, identify potential cost savings and ultimately make informed decisions about their finances. Remember, knowledge is power and understanding stock valuation can be a powerful tool for any business owner.