Cost Price Principle: Average Cost

It’s important to choose the right inventory costing method, as it affects your inventory value. With Rackbeat’s basic package, you have the option to use Average Cost.

Before you start registering stock movements, keeping track of your inventory levels, and creating sales orders, it’s important to decide which costing method you want to use. Your chosen method impacts how both cost prices and inventory value are calculated in your system.

Stay in control of inventory value and cost prices

When you choose Average Cost in Rackbeat, the cost price of your items is calculated based on the average of your purchases. This provides a stable and simple way to manage inventory—especially if your purchase prices fluctuate over time.

As an alternative, you can choose FIFO (First In, First Out), where the cost price is based on the actual purchase prices, and the oldest items leave inventory first. Which method is best depends on your business and your needs—so we recommend consulting your bookkeeper or accountant before making the decision.

Important to know

The choice between Average Cost and FIFO is made during the setup of your Rackbeat account—and cannot be changed afterwards.

Average Cost gives you simpler inventory management

When you work with Average Cost, you get, among other things:

Cost prices calculated based on the average of your purchases
More stable inventory value—even when purchase prices vary
A simpler workflow with less administrative work
A more streamlined inventory flow in day-to-day operations
A solid foundation for costing and profit margin calculations