Weighted Average Cost

Learn why item cost is important, how to add initial cost, how cost updates when receiving items, how to fix incorrect costs, and how to disable weighted average.

Table of Contents

Understanding Item Cost in ShopKeep

Review the basics of item cost and how it impacts your business. Learn why tracking item cost is important, what affects cost in ShopKeep, and how average cost is computed.

Cost and Value
Item cost is what a business pays to acquire an item. Value is the item’s cost multiplied by its quantity. By tracking item cost, a business can properly calculate inventory value and correctly measure profits. Cost also has effects on cost of goods sold (COGS), margins, and markups.

Cost in ShopKeep
An item’s initial cost is entered when the new item is added to BackOffice. After that, cost updates as you receive inventory. When an item is received, its cost updates by default to the weighted average of the current cost and the new receiving cost.

How Average Cost is Calculated
The average cost of an item is based on the number of units in inventory at an existing cost and the number of units received at a new cost.

Adding Items

An item’s initial cost can only be entered when you first add the item to inventory. See a brief overview of adding items below or see our complete Add Basic Items article for more information.

  1. In BackOffice, click 'Items' and select 'Items List'.
  2. Click 'Add New'.
  3. Select 'Create' under 'Basic Item' or 'Item with Variants'.

    Not sure which kind of item to create? Visit this interactive support article for help.

  4. Fill in the item details, including its 'Cost'.

    The item’s cost cannot be edited from this page after saving the item.

  5. Click 'OK' to save.

For a more detailed walkthrough of creating an item, visit one of these support articles:

  • Add a Basic Item
  • Add an Item with Variants
  • Receiving Inventory

    By default, cost updates to a weighted average during the receiving process for accurate inventory valuation. See a brief review below or learn more about the Receive Inventory feature from our complete article.

    1. In BackOffice, click 'Items' and select 'Receive Inventory'.
    2. Search for an item to receive.
    3. Enter the number of ‘Units received’ and the ‘Total line cost’.
      If the item has a negative quantity, adjust it to the actual quantity on hand before receiving the item.

      New cost updates to a weighted average of the old cost and the receiving cost.

      Click to see how New cost was calculated in this example.
    4. Click ‘Save’ to finish receiving the item.
    5. In the ShopKeep app, tap 'Get Updates' to sync the item's new cost with the register.

      If you receive an error while getting updates, visit our troubleshooting guide for help.

    Fixing Incorrect Costs

    If you enter the wrong cost or quantity while receiving inventory, use Bulk Management to make corrections. See a brief review below or learn more about this feature from our complete Bulk Management article.

    Bulk Management changes will override the average cost calculations for inventory items.

    1. Select 'Modify Inventory' and click 'Next'.
    2. Click 'Export your existing inventory to a CSV' and open the export in spreadsheet software.
      Click to Enlarge
    3. In the spreadsheet, delete all item rows that do NOT need to be edited.
    4. Update the cost or quantity column for remaining items on the spreadsheet.
    5. Save the spreadsheet.
    6. In Bulk Management, click 'Choose File', select the modified spreadsheet, and click 'Next'.
      Click to Enlarge
    7. Map ‘Cost’ and/or ‘Quantity’ to their ‘CSV Headers’. Change all fields other than ‘Item UUID’ to ‘unassigned’.
    8. Click 'Next' and 'Confirm & Proceed'.
    9. Refresh the page to see the status of the import.
    10. (optional) Check the Items List to verify the items’ updated cost and quantity.
    11. In the ShopKeep app, tap 'Get Updates' to sync the items' new cost with the register.

      If you receive an error while getting updates, visit our troubleshooting guide for help.

    Disabling Weighted Average Cost

    If you prefer to use the last cost of received items to value your inventory items, you can disable weighted average cost. When you receive inventory, cost will update to the per-unit cost of the item being received.

    1. Click 'Settings' and select 'Inventory Settings'.
    2. Select 'Last Cost' and click 'Save'.
      Click to Enlarge

      Now the New cost field updates to use the Total line cost divided by Units received of the received items.

      Click to Enlarge

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