How Do I Know Which Dates To Use In COGS Periods When New Stock Arrives?
- You’ve got some new stock arriving and so you’ve entered a new COGS for them. But You are not sure when the first batch will run out and when the new batch will kick in
Sure you can take a guess, but is there some easy rule of thumb or some assistance from SellerLegend to make the guess easier?
- There are a couple of things you can do:
Use the Time To Nil Stock values in the Inventory screen
- Just before your new stock is received at Amazon, head to Products –> Inventory and, for the product in question, make a note of the column ‘Days of Inventory’. This gives you the number of days to 0 stock, based on your current sales velocity. Add this number of days to today’s date, and use the resulting date to start your next Cost Period.
- For example:
- You have 20 days’ worth of inventory left.
- Today is 1st April.
- Simply add 20 to today’s date,.and set future Cost Period start date to 21st April.
- Note that it is acceptable to create future-dated Cost Periods. SellerLegend will automatically switch COGS when the future date arrives.
Use the Weighted Average Cost Per Unit
- When the new shipment has just arrived, make a note of the remaining units of the old shipment. Then do a weighted average calculation.
- For example:
- You have 20 units left of the old inventory. The old inventory COGS is $5 a unit.
- You are receiving 100 units of the new inventory. The new inventory COGS is $4 a unit.
- 20 units x $5 = $100
- 100 units x $4 = $400
- The total is $500 for 120 units
- Weighted Average COGS/Unit = $500 / 120 units = $4.17
Now, rather than adjusting EACH Cost Element in the new Cost Period to arrive at $4.17, I would just add one Cost Element called something like ‘Averaging Adjustment’ to add $0.17 to the total COGS.
I am sure that if you read the above 3 or 4 times, it will eventually make sense. It appears more difficult than it is.