Questions often come up about the Average Unit Cost and Order Cost fields in QuickBooks Point of Sale. What is the difference and what do I do with these two fields? This article should remove the mystery surrounding these two fields and help you to understand what they are and what they do for you.
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According to Intuit, The Average Unit Cost field displays the averaged cost of the on-hand quantity of the item. The Order Cost field displays the current cost of the item from your vendor, and is suggested when you make a new purchase order or receiving voucher. Both fields are updated when a receiving voucher with a new cost is made.
What does that mean to you and I? Simply put, the only time you should enter a value in the Average Unit Cost field is when you first create an item AND you have an existing on-hand quantity. Let’s look at an example of that.
Let’s say that we’re starting up a new company in QuickBooks Point of Sale. We’ll create two items, one that we have on hand and one that we don’t. First let’s take the easy one, the one we don’t have in stock. We’ll call this Thing-A-Ma-Jig 1. I’ll skip all the other fields and concentrate on the Order Cost and Average Unit Cost fields. We know that the cost of this item from our chosen vendor is $17.00 so that figure will go in the Order Cost field. Because we don’t have any of these on hand right now, the Average Unit Cost field remains blank. That’s it, we’re done with the first item.
The second item we’ll call Thing-A-Ma-Jig 2 and we currently have 10 of them on hand. We know that we paid a total of $100 for them. That averages out to $10 each. In this case we enter that value into BOTH the Order Cost and Average Unit Cost fields. That’s it, we’re done with that one.
Let me now take this a step further and show you what happens when we receive 10 more of Thing-A-Ma-Jig 2. We ordered and received 10 more of item 2 but the price has gone up. We fill out the Receiving Voucher and show the cost as $20 each. Here’s what Point of Sale will do with the Order Cost and Average Unit Cost fields for that item. The Order Cost will be updated to $20.00 because that was the cost per item on this last order. The Average Unit Cost will be updated to $15.00 because QuickBooks POS takes the total cost for the items on hand ($100 + $200 = $300) and divides it by the total quantity of items on hand (20). 300/20 = 15
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