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Managing Weighted Average Cost (WAC)
Managing Weighted Average Cost (WAC)
Christopher Ike avatar
Written by Christopher Ike
Updated this week

Weighted Average Cost (WAC) is one of the popular methods of evaluating the cost value of the inventory you have on hand. The method is particularly useful if you are sourcing products from different manufacturers at different price points.

It's calculated by dividing the total costs of products you have available on hand by the total number of stock you have.

For example, let's say you have received 20 units of products from manufacturer A at $12 per piece, 25 units from B at $10 per piece, and then 30 units at $8 from C, WAC will be calculated as follows:

WAC = (20*12) + (25*10) + (30*8)/20+25+30

WAC = $9.73

Thankfully, Uphance handles WAC for you in the background, allowing you to focus on running your business.

Enabling WAC

For WAC to work, first, you have to ensure it's enabled by navigating to Settings >> Inventory >> Costing Method.

How Uphance Calculates WAC

Uphance calculates WAC for a product by taking into account the unit cost stipulated in the production order.

This means when you receive goods from your manufacturer and check them in, Uphance will record the unit cost for each product. It does this every time you receive an inventory while recording the WAC history, which can be accessed from the Production tab.

Here's an example:

Keep in mind that Other Costs on the WAC history implies Shipping costs + Additional delivery charges. These charges are added to the Vendor's invoice, whereas shipping costs are taken from delivery.

To add additional delivery charges, first, create a delivery for any production order you receive. Then add the charges as illustrated below:

What if you wish to add a charge to multiple deliveries instead of one? You can do that by opening the Goods Receipts page. Select the deliveries/production orders you want to charge and click Actions> Additional charges.

Once you've added the charges, Uphance will create a vendor invoice that outlines all the deliveries/production orders the charges was created for.

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