1. Average Cost Inventory Transaction Cost Inv
Item Transaction Org Org Lot Quantity
A PO Receipt1 OrgA OrgA 1 7
A PO Receipt2 OrgA OrgA 1 8
A PO Receipt3 OrgA OrgA 2 9
A SO Shipment1 OrgA OrgA 2 8
Receipt Cost (based on PO)
Item Transaction Unit Cost
A PO Receipt1 $10
A PO Receipt2 $11
A PO Receipt3 $12
Average Cost
What is the item’s Valuation Structure?
Cost Org + Inventory Org
Org A + Org A + A
$10.00
$10.53
$11.08
+ / 15
/ 24
Inventory Valuation Units
Shipments
Inventory Account
Org A + Org A
SO Shipment1 -8
$10
PO Receipt3 +9
$11
$12
PO Receipt2 +8 -1
$11.08
PO Receipt1 +7 -7
$11.08
COGS
$11.08
$11.08

2. Average Cost (at lot level)
Inventory Transaction
Cost Inv
Item Transaction Org Org Lot Quantity
A PO Receipt1 OrgA OrgA 1 7
A PO Receipt2 OrgA OrgA 1 8
A PO Receipt3 OrgA OrgA 2 9
A SO Shipment1 OrgA OrgA 1 8
Receipt Cost (based on PO)
Item Transaction Unit Cost
A PO Receipt1 $10
A PO Receipt2 $11
A PO Receipt3 $12
Average Cost
What is the item’s Valuation Structure?
Cost Org + Inventory Org + Lot
Org A+Org A+Lot1+A
$10.00
$10.53
+ / 15
Org A+Org A+Lot2+A
$12.00
Inventory Account
Inventory Valuation Units
Shipments
$10
Notes:
An example of tracking average cost at the lot level. Notice that because the valuation structure is at the lot level, each lot will have it’s own valuation unit and average cost.
Org A+Org A+Lot1
Org A+Org A+Lot2
SO Shipment
$11
PO Receipt
$12
$10.53
PO Receipt -1
$10.53
PO Receipt -7
COGS
$10.53
$10.53

3. Average Cost (at lot level, ship from Lot 2)
Inventory Transaction
Cost Inv
Item Transaction Org Org Lot Quantity
A PO Receipt1 OrgA OrgA 1 7
A PO Receipt2 OrgA OrgA 1 8
A PO Receipt3 OrgA OrgA 2 9
A SO Shipment1 OrgA OrgA 2 8
Receipt Cost (based on PO)
Item Transaction Unit Cost
A PO Receipt1 $10
A PO Receipt2 $11
A PO Receipt3 $12
Average Cost
What is the item’s Valuation Structure?
Cost Org + Inventory Org + Lot
Org A+Org A+Lot1+A
$10.00
$10.53
+ / 15
Org A+Org A+Lot2+A
$12.00
Inventory Account
Inventory Valuation Units
Shipments
$10
Notes:
An example of tracking average cost at the lot level with the twist that the shipment is from Lot 2 (the previous example was a shipment from Lot 1). Notice that the depletion will come from the valuation unit corresponding with the Lot that was shipped.
Org A+Org A+Lot1
Org A+Org A+Lot2
SO Shipment
$11
$12
PO Receipt -8
$12.00
PO Receipt
PO Receipt
COGS
$12.00