Two methods for periodic costing are available:

For WAVG, you can determine the item unit cost by analyzing initial inventory before period start as all received inventory during the calculation period, but for FIFO, item unit cost is based on how inventory is consumed. For more information, see Weighted Average (WAVG).

For FIFO, there are key differences in theoretical calculations and the QAD approach. The QAD approach approximates the theoretical calculations but considers practical issues such as:

Also, when you use FIFO, for the overhead cost of RCT-PO, you set up overhead cost of the prior period using PC Unit Cost Adjustment. When the system processes RCT-PO, it reads the PC cost from the prior period cost set.

For FIFO, when there are multiple buckets set up for every period, you should set up overhead cost for the first bucket of prior period. For more information on FIFO, see First, In, First Out (FIFO).

In the QAD solution, the system averages the unit costs by cost calculation period, by dividing total value of received goods by the total quantity received. The system maintains the quantity received by cost calculation period by consuming the inventory from the oldest periods first and then chronologically period by period up to the most recent period.

The topics within this section explain each method and provide examples in tables. In the tables, goods for sale (or quantity to issue) considers the beginning inventory and the quantities received during that period, which are the inbound receipt transactions. The different formulas to define the periodic costs are illustrated using the example shown in Formula Example.

Weighted average (WAVG) considers the previous period cost and the average of the cost incurred this period. WAVG assumes that the material or production of a given kind is so intermingled that an issue cannot be made from a particular lot and cost should, therefore, represent an average of the entire supply. The calculation considers the previous period cost and the average of the cost incurred this period. The system looks at the Inventory and WIP Balance Report (30.5.19.2) to determine the ending balance from location detail and uses the information when determining costs in the cost calculation period when you use the WAVG method.

Average cost produces results that typically fall somewhere between results for FIFO costs. The calculation is as follows:

For the following examples, WAVG is in use to define the periodic costs using the example shown in Formula Example.

Average cost produces results that typically fall somewhere between results for FIFO. The calculation is as follows:

The First In, First Out (FIFO) method considers the receipt date of items for all existing inventory. This method assumes that the oldest (first) item in stock is issued first.

For FIFO, there are key differences in theoretical calculations and the QAD approach. The QAD approach approximates the theoretical calculations but considers practical issues such as:

In the QAD solution, the system averages the unit costs by cost calculation period, by dividing total value of received goods by the total quantity received. The system maintains the quantity received by cost calculation period by consuming the inventory from the oldest periods first and then chronologically period by period up to the most recent period.

Also, when you use FIFO, for the overhead cost of RCT-PO, you set up overhead cost of the prior period using PC Unit Cost Adjustment. When the system processes RCT-PO, it reads the PC cost from prior period cos set.

For FIFO, when there are multiple buckets set up for every period, you should set up overhead cost for the first bucket of prior period.

The following table provides the theoretical way that FIFO is calculated.

The ending inventory was received at two occasions’ costs:

The FIFO method provides a good indication of the balance sheet value of ending inventory. However, in an economy with rising prices, it also increases net income because older inventory is used to value the cost of goods sold—potentially increasing the amount of taxes that a company should pay.

The following example shows the QAD FIFO solution.

The QAD FIFO solution considers buckets with a weighted average that is calculated based on all receipts and specific related costs.

In the example, the system created only one bucket. The system first calculates the weighted average of the bucket; then, consumes inventory based on FIFO principles.