1. SCM (Supply Chain Management)
  2. Item Record Management
  3. Item Costing
  4. Group Average Costing

Group Average Costing

Group average costing lets you track one average cost for an item across multiple locations within a defined group.

Group average costing is available only when you have enabled the Multi-Location Inventory feature. Group average costing is available for inventory items and assembly items.

First, create a location costing group record to track the locations associated with that group. Then, assign one or more locations to a location costing group. For more information, see Creating a Location Costing Group.

Each time an inventory related transaction with costing impact is processed for a location costing group member, a group average cost is recalculated. The single average cost is calculated by dividing the total inventory value across locations by the total quantity across all locations. This calculated cost is synced within the group and is used in costing calculations for all locations.

Note that individual items are not assigned to a location costing group. Within a location, all inventory and assembly items assigned the Group Average costing method are included in the location costing group assigned to that location.

If an item is assigned the group average costing method, but its locations are not included in a costing group, note the following. For those locations, the item's costing method is Average because no grouping calculations are done for those locations.

One benefit of group average costing is costing for underwater fulfillments. For example, a cost posts for Location A in the group and that cost propagates to the Location B in the group. If an underwater fulfillment posts for Location B, an average cost can be assigned to the underwater fulfillment. For more information, see Avoiding Underwater Inventory.

Inventory Adjustment Worksheets are not available for items with a Group Average costing method.

Note:

After Group Average is assigned to an item and the item is saved, you cannot change the costing method.

Group Average Costing and Subsidiaries

The following applies to NetSuite OneWorld customers.

The locations in a location costing group can be associated with one or more subsidiaries. When using locations from different subsidiaries in the same location costing group:

  • All subsidiaries in the same location costing group must have the same base currency.

  • Note the following requirement for a subsidiary within a group using the Multi-Book Accounting and Multiple Currencies features. All subsidiaries in the group must have the same secondary books and identical currencies. This requirement is to calculate the group average cost across all subsidiaries in all currencies.

Group Average Costing and Multiple Locations

Note the following for customers using both the Multi-Location Inventory and Group Average Costing features. You can set an accounting preference to include the account values for group average cost items that are in transit between locations. This allows in-transit inventory accounts to be balanced during the bulk process.

This accounting preference helps produce more accurate costing calculations and financial statement reporting. It ensures that the group average cost reflects the assets of both on-hand and in-transit inventory accounts.

If you have the Set Up Accounting permission, you can set the Include In-Transit Value in Group Average Cost Calculations preference. For more information, see Items/Transactions Accounting Preferences.

Group Average Costing Use Cases

When you use group average costing, the item cost is calculated based on costs across all locations in the group.

Group Average Costs

The preceding table describes sample data used in group average costing calculations for an item receipt.

  1. Location Costing Group Total Quantity – Location costing group total on-hand quantity resulting from the current transaction

  2. Location Costing Group Total Value – Location costing group total value prior to the transaction + transaction value at location

  3. Group Average Cost Across All Locations – Location costing group total value result from the current transaction

    Note:

    After the group average cost is calculated, it is assigned to the item across all locations in the location costing group.

Transactions process group average costing as follows.

Item Fulfillment

An item fulfillment uses the group average cost. Therefore, the group average cost does not change due to the transaction.

Group Average Cost Example

Item Receipt or Inventory Adjustment

An item receipt or inventory adjustment can have a rate that is different from the group average cost. Therefore, the group average cost of the item can change due to the transaction.

Group Average Cost Example

The group average cost fluctuates over time as transactions are entered.

Related Topics

General Notices