Weighted Average Cost

An item’s cost helps determine inventory value and affects other reporting metrics, such as margins. Enter an item’s initial cost when you create it, easily update the cost to a weighted average as you receive inventory, and adjust the cost if it is incorrect. To stop calculating cost based on a weighted average, disable the weighted average cost feature.

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 affects cost of goods sold (COGS), margins, and markups.

Cost in ShopKeep
An item’s initial cost is entered when the item is created in BackOffice. After that, cost updates as you receive inventory. When an item is received, its cost updates by default to a 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 visit our complete Add Basic Items article for a complete walkthrough.

  1. In BackOffice, click 'Items' and select 'Item List'.
  2. Click 'Add New'.
  3. Select 'Create' under 'Basic Item' or 'Item with Variants'.
  4. Fill in the item's details, including its 'Cost'.

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

  5. Click 'Save' to create the item.

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, an item’s cost updates to a weighted average when you receive inventory. See a brief overview of the inventory receiving process below or visit our Receive Inventory article for a complete walkthrough.

    1. In BackOffice, click 'Items' and select 'Receive Inventory'.
    2. Search for an item by name or UPC and click on it.
    3. If the item has a negative quantity, adjust it to the correct quantity on hand before receiving the item.

      Learn how to adjust inventory quantities here.

      Failure to complete step 3 will result in an incorrect quantity and cost for the item after receiving it.
    4. Enter the number of ‘Units received’ and the ‘Total line cost’.

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

      Click to see how New cost was calculated in this example.
    5. Click ‘Save’ to finish receiving the item.
    6. In the ShopKeep register 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 when adding or receiving inventory, use Bulk Management to make corrections. See a brief overview below or learn more about this feature from our full support article.

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

    1. Start a new Bulk Management job.
    2. Select 'Update Items' and click 'Next'.
      Click to Enlarge
    3. Click 'Export your existing inventory to a CSV' and open the export in spreadsheet software.
      Click to Enlarge
    4. In the spreadsheet, delete all item rows that do NOT need to be updated.
    5. Update the 'Cost' and/or 'Quantity' column for remaining items on the spreadsheet.
    6. Save the spreadsheet.
    7. In Bulk Management, click 'Choose File', select the updated spreadsheet, and click 'Next'.
      Click to Enlarge
    8. Map ‘Cost’ and/or ‘Quantity’ to the correct ‘CSV Headers’ and set all fields other than ‘Item UUID’ and 'Name' to ‘unassigned’.
      Click to Enlarge
    9. Click 'Next', then 'Confirm & Proceed'.
      Click to Enlarge
    10. Refresh the page to see the status of the import.
    11. (Optional) Check the Items List to verify the items’ updated costs and quantities.
    12. In the ShopKeep app, tap 'Get Updates' to sync the items' new costs 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 receiving cost to value inventory, disable weighted average cost. Then when you receive an item, its cost will update to the per-unit cost being received.

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

      Now when you receive inventory, the New cost field updates to the value of the Total line cost divided by Units received.

      Click to Enlarge

    • Help us improve ShopKeep Support. Was this article helpful?
    • YES   NO