This onboarding resource defines Finale’s average cost feature and provides an explanation of how it is calculated, or assigned. This step is mandatory for users wanting to track their cost, but it is optional if otherwise.

Define Average Cost

Finale’s weighted average cost method assigns a cost to inventory items based on the total cost of goods purchased divided by the total number of items purchased.

From an accounting perspective, please note that Finale supports landed cost, allowing the user to allocate adjustments across your products on a purchase order by subtotal, weight, or quantity ordered. This allocation process rolls up the adjustment cost into your inventory asset, capturing the true cost of receiving your inventory.

Finale calculates, or assigns, your average cost using three features: purchase orders, builds, and average cost changes. Most users in the onboarding phase usually take advantage of the average-cost-change method.

As notated above, Finale does use an average weighted landed cost, allowing the user the opportunity to roll-up their adjustment costs into their inventory value, accounting for the true cost to receive items.

Manufacturing Build

If you manufacture finished goods from raw materials, then the average cost of the raw materials received will be rolled-up into your finished goods when a build is completed based on the bill of materials. This is only relevant if you use the build feature in Finale to produce finished goods.

Please keep in mind this only includes the cost of your products. It does not take into account labor and waste, as this is only a light manufacturing tool.

Average Cost Change

The last method, and most commonly used method during the onboarding process, is the average cost change. This option allows the user to input the average cost of your products with an effective date. This can be performed by manually entering each cost on each product line within the average cost change screen, or you can use a two column spreadsheet (product ID and average cost) to import the costs in bulk.

Finale recommends that you back date your average cost change to a date prior to when inventory enters the system, so that your inventory enters with an initial cost level, ensuring your cost information is accurate from the beginning.