Shiptory applies the Moving Average Calculation method to define the cost of an item in the warehouse. This means that the cost of items that are stocked in is added to the cost of existing inventory and divided by the new total quantity of the same SKU (or bin) items.
Example:
- Cost of existing 100 apples at $90.00 = $0.90 per apple
- Cost of newly added 100 apples at $70.00 = $0.70 per apple.
- New calculated moving average cost = (90+70)/200 = $0.80 per apple.
From here, any added inventory takes the last calculated cost as the starting point to calculate and update the cost, and so on.
This method gives the seller a good idea of the cost to make decisions on the pricing of products and the profit to expect from sales.
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