Does Craftybase use LIFO, FIFO or Weighted Average Cost?
Craftybase uses the Weighted Average Cost for your Material and Product cost unit values. This inventory costing strategy is also known as the moving average or rolling average method.
This is an accepted GAAP and IRS method of accounting for inventory and is the one most commonly used in manufacturing situations as it effectively allows for "pooling" of materials that are constantly increased and decreased .
The Weighted Average Cost method involves recalculating all unit costs for materials and project material cost each time any change is made to inventory levels based on the amount available in stock at each point in time. Details on how we calculate weighted averages can be found here: What is the Weighted Average Cost Method?
For materials, changes to inventory levels occur when more of the same material is purchased, or a manufacture is created using some of the material. For projects, changes to inventory levels occur when the product is manufactured or sold.
For more information on how Weighted Average Cost differs to other Inventory Cost methods such as LIFO and FIFO, please see our blog post here: Which method of valuing inventory is best for your handmade business?