About material costs
Learn about how Craftybase calculates your material costs.
Material costs in Craftybase are calculated for you automatically, using your complete inventory history.
Each purchase of your material will recalculate your unit costs to include the new material stock: thus providing you with real-time costs.
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 on 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.
Using this method means we can give you a very accurate real-time cost for your materials on any date.
Your Unit Cost is the cost to purchase a single unit of your material.
Your Unit Cost will also include discounts and shipping paid in purchasing the material - this is also commonly referred to as a "landed cost" or "fully landed cost". It essentially ensures that your unit costs include all additional expenses you have incurred to bring the material to you so that your material valuations and COGS totals reflect this (How are unit costs calculated for materials?).
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 instead.
Your Actual Unit Cost is calculated by proportioning the amounts from your material expense - this is done automatically by Craftybase when you save the new material expense.
Your Actual Unit Costs are used to calculate your pricing guidance, your 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. All changes to unit prices need to be automatically calculated by Craftybase 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 in the total price you paid for the group of items and Craftybase will calculate the individual unit price for you. This is really handy for purchases like buttons or beads, where there are hundreds or thousands of individual parts per package.
Changing a material's unit cost
If you have set your material's unit cost on the Add Material form, 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.