Average Cost is a method of calculating the value of inventory. When you track inventory for an item you keep in stock, WorkingPoint uses the Inventory Assets account to record how much you paid for item(s) and tracks how many you have available to sell. From the Inventory Asset account, you can see the value of all the items in stock at a glance.
The average cost of an item is calculated by dividing the total cost of the items you currently have in stock by the total number of units for sale. WorkingPoint automatically changes the Average Cost based on adjustments you make and purchases you make for the same item, but at a difference price.
Because WorkingPoint calculates average cost based on the items you currently have in stock, when you have sold all the units of an item, your average cost will be zero. When you purchase or add inventory to the item again, WorkingPoint will recalculate the average cost based on the cost of the new items.
Example of Average Cost Calculations
What is the difference between Price Per Unit and Cost Per Unit?