Problem: The cost of items is reduced during Month End Closing. What is the reason?
Solution: Item Cost price in FirstBIT is calculated according to Weighted average cost method using System of linear equations. The cost of each item is determined based on the weighted average cost of similar items at the beginning of the period and the cost of similar items purchased or produced during the period.
The example of average cost price calculation will be described on the below example, when Sales, Purchase and Additional Expense are resented in the same month and Month End closing makes the equation of item's cost price:
On December 1st, the item had the balance - 10 QTY. Average Cost Price (further ACP) is 10 AED.
Then on December 2nd, 5 qty of items have been sold. As ACP at the invoice issuing time was 10 AED the system has deducted 50 AED from item stock:
Later on the 5 qty of items by the same price have been purchased and additional expense has occurred during the purchase so the AVG became 11 AED:
But as on the time of Sales Invoice posting the opening ACP (on the beginning of the month) has been deducted from the stock, the system is making the equation during month end closing and deducting the actual item cost for this sale. It's taking all stock balance during the month and calculates ACP, i.e. Total qty=10+5=15, total balance = 100+50+10 = 160 ED. ACP = 10,66666667 AED.
As during the sales document posting only 50 AED (10 AED per item) was deducted, the system should equalise this cost, i.e. Cost correction = (10,66666667*5) - 50 = 3,333333 AED:
