Accounting method used for inventory value & unit costs

Zenventory uses a "specific identification" method for calculation of inventory value in our reports. Each unit of inventory received is assigned a particular value upon receipt - the unit cost; that value sticks with the unit of inventory until sold/deducted.  Inventory is auto-allocated to orders based on a user set priority system of the below 4 options.  The auto-allocation priority can be set on the Admin>System>Basic Settings page.  

• Perishable items will be allocated as FEFO (First Expiring, First Out)
• Lot-tracked product will be allocated based on the lot number (A-Z, ascending)
• Items stored in multiple locations in the warehouse will be allocated based on location name (A-Z ascending) and/or stock quantity (a "pick to clean" method for ensuring that low stock positions are cleared first to make room)
• Delivery Date (First in First Out)

There is also a possibility that a user within the system can choose to manually allocate stock for an order or for deduction. In this situation, they can choose any particular stock without regard for any of the rules above.

RECEIVED UNIT COST

Unit cost is defined upon receiving an item. This field can be edited in the second step of receiving - if the item has a default unit cost (set up in Admin > Items > Default Unit Cost), that will appear here, otherwise it will be $0.00 and can be edited if needed. 

Default Unit Cost: 

No Default Unit Cost:

If we look at the receiving page, we can see that the total dollar amount is the quantity received multiplied by the unit cost upon receipt. When a user wants to view the current cost of inventory, there are two report is under Reports > Inventory Reports > Current Cost of Inventory by SKU or Category and have a PDF and CSV version. This will give the total cost for items in stock based on the average unit cost. This means if there are 10 units of an item with a unit cost of $10 and 10 units of that same item with a $20 unit cost, the average cost of that item is $15 and the average cost is the $15 multiplied by the 20 total units for a total cost of $300. ([$10 + $20]/2 = $15 x 20 units = $300). 

RETURNED ITEM UNIT COST

When you return an item using the Orders>Return page the unit cost used is matched to the unit cost of the item that went out on the order originally.  If the order had multiple quantity of an item with different unit costs, then we prioritize returning the lowest unit cost first available first.