Cost/Price/Profit How does RMS compute profit margin?

I started writing some long explaination of how RMS calculates cost then I thought to myself what the hell am I doing, so I deleted what I wrote and copied and pasted this explaination from the SO Online Help under the Inventory tab. You can get to the inventory tab by going to SO Manager --> File menu --> Configuration.

Rob

********************************************************** Cost Update Method:

Store Operations can automatically update the cost of each item received through purchase orders and inventory transfers. Specify which cost update method Store Operations should use when items are received.

· None: Select this method if you do not want to change existing item costs when purchased items are received. · Last Cost: Select this method if you want to replace existing item costs with received costs shown on purchase orders. For example, assume that you have in stock 20 hammers that cost $10.00 each. You then order 10 more hammers that cost $12.00 each. If the last cost method is selected, Store Operations automatically changes the cost for the hammers to $12.00 when the 10 hammers are received. · Weighted Average: Select this method if you want Store Operations to update the item cost based on an average cost of all units of that item. When you receive new items, Store Operations adds the total cost of the unit received to the total cost of the existing units. This total cost is then divided by the total number of units on hand. For example, assume you have in stock 20 hammers that cost $10.00 each. You then order 10 more hammers that cost $12.00 each. If the weighted average cost method is selected, Store Operations automatically changes the cost to $10.67 when the 10 hammers are received. Look at the following computation:

Total cost = 20 hammers @ $10.00 each + 10 hammers @ $12.00 each = $320.00

Weighted average cost = $320.00 / (20 hammers + 10 hammers) = $10.67

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"Scott Smith" wrote:

Scott,

You've been using the Average Cost method for years. ;-)