How the System Uses Average Cost for Purchase Orders

A product's average cost is maintained at the branch level. The average cost is the range in which a product's price falls. A product's price can vary from branch to branch due to buying patterns and branch locations. The prices in effect at the time of purchase can also be different because of the date a vendor price change goes into effect. For example, you may receive notice that your vendor is raising the price on all faucets, but the price change will not go into effect until the first of the month. Variances in freight charges also affect the landed average cost.

Average Cost is also known as Moving Average Cost (MAC).

Changing the Price on a Purchase Order

The cost of an item on a purchase order can be changed if you assign permission.

You can regulate who can change the cost of an item on a purchase order and by how much that cost can be varied. If the price change exceeds the percentage you set, either above or below the current cost, the user receives a warning message.

If the user has permission to continue, the warning is logged and the changed accepted. If the user does not have permission, a prompt displays for the user to enter a password to continue. For example, you can limit who can change prices for customers and ensure that personnel on the sales floor cannot change prices within ten percent (10%) of the original cost without checking with their supervisor.

How Does Average Cost Work?

Use the Maximum Difference Percentage From Average Cost In POE control maintenance record to set the percentage allowed on the product price change.

For example, you want to make sure that if a product's price of $10.00 is changed in branch 4, that the change does not exceed five percent (5%) above or below the $10.00 price. Set the Maximum Difference Percentage From Average Cost In POE control maintenance record to five percent (5%) for branch 4. When you change the price on the purchase order to $5.00, the message "You are about to exceed the Maximum Difference Percentage from Average Cost! Continue (Y/N):" displays. Select one of the following:

Yes – The system updates the change log file with the message and changes the cost. If you do not have the POE.MAC.OVERRIDE authorization key set, you are prompted for a password.
No – The average cost remains and no entry is made in the change log file.