About material costs

Learn about how Craftybase calculates your material costs.

Material costs in Craftybase are calculated automatically using your complete inventory history.

Each purchase of your material will recalculate your unit costs to include the new material stock, thus providing real-time costs. 

In this article we'll cover:

• Moving Weighted Average Cost Method
• Understanding Unit Costs
• How material costs change over time
• How to set material costs manually
• How to track materials with small unit costs
• How to change a material's cost unit

Moving Weighted Average Cost Method

We calculate your unit cost using a Moving Weighted Average Cost Method. It's not entirely necessary to understand the finer details of how this is calculated other than the fact that this IRS-approved method involves factoring in the new stock using the new cost, along with your current stock at another to calculate a new unit cost that represents the new pool of all stock on hand. 

This method means we can give you a very accurate real-time cost for your materials on any date.

Unit Costs

Your Unit Cost is the cost of purchasing a single unit of your material. 

Your unit cost will also include discounts and shipping paid when purchasing the material - commonly called a "landed cost" or "fully landed cost." It ensures that your unit costs include all additional expenses you have incurred to bring the material to you, so your material valuations and COGS totals reflect this.

It does not include any tax applied to the expense (i.e., all Actual Unit Costs are ex-tax). This is because tax should not usually be factored into your material valuation and COGS calculations - the tax paid to purchase your materials is normally claimed as an indirect expense.

Your Actual Unit Cost is calculated by proportioning the amounts from your material expense. Craftybase automatically does this when you save the new expense. 

Your Actual Unit Costs are used to calculate your pricing guidance, manufacture and order material costs, and inventory value / COGS.

How material costs change over time

The diagram below shows how material costs can change over time in Craftybase based on different purchases made of the same material. 

The material starts with a starting unit cost of 0.72. However, expenses over time slowly increase and decrease the unit cost of the material (from 0.72 up to 0.81). These costs can be pin-pointed at any time between the expenses using the moving average cost method.

Setting material unit costs manually

It is not possible to set your material unit prices manually. Craftybase needs to automatically calculate all changes to unit prices to ensure that your inventory values are consistent and accurate.

For more information on how Craftybase calculates unit prices, see our help article: How are unit costs for materials calculated?

Tracking materials with small unit costs

Materials in Craftybase can be tracked to 5 decimal places (i.e. 0.99999). 

Whenever you add a new Expense for a Material, you can enter the total price you paid for the group of items, and Craftybase will calculate the individual unit price for you. This is handy for purchases like buttons or beads, with hundreds or thousands of individual parts per package.

Changing a material's unit cost

Suppose you have set your material's unit cost on the Add Material form. In that case, this information is saved as the material's Starting Adjustment, along with the quantity entered in the same section. 

To change this unit cost, you'll want to edit your Starting Adjustment by following the instructions in this help article: How do I edit a Material Inventory Adjustment?

If you have entered an incorrect unit cost via a Material Expense, you'll need to locate and edit the expense (How do I edit an Expense?). Once you have made the changes, your material's unit cost will be automatically updated for you.