MAP, also known as “Moving Average Price”, inventory method is when the system uses the average price of the parts on hand when received through a purchase order or otherwise brought into the inventory by means of a positive transaction. Each positive transaction (such as receipts, transfer in, etc.) causes the system to recalculate the average weighted cost by price per item.
This inventory method does not consider negative transactions. This method will only update the Weighted Average Cost when a positive transaction occurs. These can be receipts from PO's, Adjustments, or Returns form a Work Order.
The following example shows the purchase, receipt, charge (or issue to a WO), and additional purchases, and receipts of the parts and how the system reflects the Average Weighted Cost.
Below you will see an item that currently has 0 on hand, and also the added filed of "Avg. Wt. Cost". This is the field that will the cost will be applied from when a charge/issue is made in the system. You can leave the Unit cost field on the form, but it only reflects what cost was associated to the last positive transaction.
To add the field, manage tables and add the field from the selection of the Existing Fields.
We then create a purchase order(PO_10) to purchase 5 parts at $15.00 each and then receive the PO.
A second PO (PO_11) is issued for the same part, but in this instance, the parts cost $12.50. You will see the Purchase in the Part History, but the parts have not been received yet.
A part is then charged to a Work Order at the cost of $15.00, what is currently reflected as the Avg. Wt. Cost, as well as what the cost of the part was purchased and received at since this is the first time the part was purchased.
After this part is charged, the next 5 parts arrive from PO_11, and are received in to the system.
By receiving these parts, you will notice that the unit cost on the main inventory item record now reflects the cost of $12.50, the price at which these 5 parts were purchased at. However, you will now notice the the Avg. Wt. Cost is updated from $15.00 to $13.61.
This was calculated by taking the 4 remaining parts at $15.00, and the 5 new parts at $12.50, adding the total of all those parts and dividing by 9.
The next 2 parts that are charged out to a Work Order are now charged out at $13.61.
NOTE: The charges window will show the most recent cost from the Inventory Record, but once the charge is processed, it will associate the Average Weighted Cost that is associated to that individual part. Therefore, when you charge a part it will always use the Avg. Wt. Cost after saving the part charge.
The next occurrence in the system is the creation and receipt of PO_12. These 5 parts were purchased at $14.25 which updated the Average Weighted Cost to $13.88.
There are then a series of charges of this inventory item to a Work Order create in the system.
.
Since the system is set to respect MAP, the part charge will reflect the average weighted cost that was calculated when this part was last received in.
As you see in the part history, there is another purchase of this particular inventory item, before all parts are charged. There is a 4th PO (PO_12) that purchased parts at $10.00. The system will take the remaining 4 parts from PO_12 that were averaged out to $13.88, and the 5 parts received in on PO_13 at $10.00, adds the total cost associated to all parts, divides by the total of 9 parts, and gives a new Average Weighted Cost of $11.72.
SUMMARY
- Part Purchased and Received on PO_10 at $15.00 each.
- Part Purchased on PO_11 at $12.50
- Part Issued (Charged) to WO at $15.00
- Parts Received on PO_11 at $12.50.
- This now sets the Average Weighted Cost to $13.61
- 2 separate charges of item to WO after receipt of 5 parts on PO_11 that changed the Weighted Cost to $13.61.
- Part Purchased and Received on PO_12 at $14.25
- This now sets the Average Weighted Cost to $13.88
- Multiple charges of part to a WO. All parts charged out at last calculated Average Weighted Cost, which is $13.88.
- Part Purchased and Received on PO_13 at $10.00.
- This now sets the Average Weighted Cost to $11.72
- All parts charged or issued until next positive transaction, will have the current weighted cost of $11.72 associated to them.