Last Cost Variance

A Last Cost Variance is created in RetailManager when the cost price of an item has changed while using the Last Cost method of stock valuation. RetailManager will revalue all existing stock on-hand of that particular item at the new cost price.

The calculation is: (new cost - original cost) * original quantity 

This applies to the following transactions:  Goods Received, Goods Received with negative quantity, Cost change in the Information > Stock window and Merging one stock item into another.

Example of a Goods Received committed using Last Cost

1. Item A has an In Stock quantity of 10 and Ex Tax Cost of $40. This means that the stock value of Item A is $400.                       

1. Item A is purchased from a supplier and the cost price is now $50. A Goods Received transaction is processed for a further 10 units at $50 each.

1.                            
2. RetailManager changes the Ex Tax Cost of the item to $50 and the stock value is now $1000 (20 * $50).

1.                        
2. Using the calculation above, a Last Cost variance is created for $100. The calculation is ($50 - $40) * 10 = $100

If you use the Accounting Export feature:

Apart from the Goods Received getting exported to MYOB Accounting as a Purchase, the above example will also create a journal entry like the one below.

If you are unsure of where a Last Cost Variance has come from, you can run the Accounting Export report in RetailManager, found under Tools > Reporting > Misc.

1. Go to the Setup menu and choose Options.
2. Click General then click the Other tab.
3. Select the Use Average Cost option.
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How is an Average Cost calculated?

• The Average cost calculation is: ((original quantity * original price) + (new quantity * new price)) / (original quantity + new quantity)

• This calculation is applied to the following transactions, Goods Received, Goods Received with negative quantity and Merging one stock item into another

• .

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  A Last cost variance will not be created when using Average cost in RetailManager.

Example of Goods Received committed using Average Cost

1. Item A has an In Stock quantity of 10 and Ex Tax Cost of $40. This means that the stock value of Item A is $400.

1.               
2. Item A is purchased from a supplier and the cost price is now $50. A Goods Received transaction is processed for a further 10 units at $50 each.

1.        
2. RetailManager calculates the new cost of the item to be $45 and the stock value is now $900 (20 * $45).
3. The calculation is ((10 * $40) + (10 * $50)) / (10 + 10)

1. $400 + $500 / 20 = $45.

If you use the Accounting Export feature:

The Goods Received will be imported into your MYOB accounting software as a Purchase bill. No journal entry will be created.

The average cost calculation cannot be used under the following conditions: 

• Stock item A has a negative In Stock quantity.
  
• A Goods Received transaction is processed that brings the stock holding of item A back to zero.

• The cost price has changed in the Goods Received.

A Last Cost Variance will be created in the above scenario because a stock holding of zero cannot be divided by zero. The new cost of item will be what was entered on Goods Received.