How To Determine the Average Cost Based On The Transaction History

(Doc ID 309515.1)

Last updated on OCTOBER 23, 2017

Applies to:

Oracle Cost Management - Version 11.0 to 11.5.10.0 [Release 11 to 11.5]
Oracle Cost Management - Version 12.2 and later
Information in this document applies to any platform.

Goal

If the average cost of an item is incorrect, then an average cost update must be performed to correct the cost. The average cost of an item is updated each time a transaction against an item is performed.

This has an effect that it becomes difficult to determine the correct current cost of an item.

The Oracle Cost Management User Guide (Chapter 5 - Average Costing, Average Cost Recalculation) gives the following formula to determine the average cost :

(transaction value + current inventory value) / (transaction quantity + current onhand quantity)

Due to the fact that current inventory value is modified, this is usually not possible.

Solution

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