How to Compute the Costing Methods in Odoo

Costing Methods in Odoo:

When you purchase and sell products there are various methods in which you can track your costs and the overall value of your inventory. By default, Odoo uses the standard cost of your product that you specify for all calculations. For any trading or manufacturing business, it is a necessity to compute the cost of the product consumed to get the value of the current inventory available in the Warehouse. Odoo Costing method plays an important role in manufacturing or trading business.

In this Blog, you are going to discuss different costing method in Odoo. Odoo has three different methods to compute the cost of consumed products—-
1.Standard price(The value is Manually inputted in the cost field)
2.Average price(The value becomes read-only and the system automatically computes and applies)
3.Real Price( Either the last incoming shipment based cost or the first incoming shipment based cost will be used for valuation)

Odoo allows any method. Standard price is the default method. Whenever you didn’t specify the costing method in product category form at that time you are used Standard price method.

1. Standard price:

The standard price method doesn’t affect the cost price of the product according to the purchase or other inventory adjustments. The cost price usually needs to be changed manually, in case of products costing method is the standard price.

Now you can create a new product category for the standard price.

Go to Inventory -> Configuration -> Product categories -> Create category name 

 Now you can create a product with a created category and set the cost price and sales price manually.

Here, Cost of Standard Product  is set as 8$ and Sales Price is 10 $

At that time go to purchase apps and  making a purchase with unit cost 10$

At that time go to products -> Standard product, check the cost price of the product.  The cost price will be still 10 and no change.

 

2. Average price:

In average price costing method, different the cost price according to the total quantity shipped and the purchase price.  When you select the average price costing method,  the cost price is actually dynamically calculated and you did not need to specify the cost price. The cost is calculated on the total average price according to the quantity. In the average costing method, the cost of items in inventory is calculated based on the average cost of all available similar items in inventory.

Now you can create a new product category for Average price

go to inventory -> configuration -> products -> product category -> create category name

Now you can create a product with a created category as average price costing method and set the cost price and sales price manually. Initially, the product cost is set to zero.

At that time go to purchase apps and making a purchase order for a quantity of 8 units with a purchase price of $10.

 

At that time go to products -> Standard product, check the cost price of the product.  The cost price will be automatically updated as 10.

then, making another purchase order for a quantity of 4 units with a purchase price of $16.

 

At that time go to products -> Standard product, check the cost price of the product.

3. Real price:

Real price costing method, which actually updates the cost price of the product according to the last outgoing product in inventory. So the removal strategy like LIFO, FIFO, has the main role in this method. The cost price of the product doesn’t changes until a product is removed from inventory by any of the removal strategies. It is a very powerful method to Implement FIFO, LIFO, and FEFO Delivery policies. And its working fine in all the scenario including landed cost calculation.

Now you can create a new product category for Average price

go to inventory -> configuration -> products -> product category -> create category name

 

Now you can create a product with a created category as real price costing method and set the cost price and sales price manually. Initially, the product cost is set to 10.

 

At that time go to purchase apps and making a purchase order for a quantity of 8 units with a purchase price of $10.

At that time go to product >>> real product. Check the cost and you can see it is still 10.

then, making another purchase order for a quantity of 4 units with a purchase price of $16.

 

Then go to the product -> real product, check the cost of the product and it is still 10.

 

If you are looking for Odoo implementation for your manufacturing business  contact us here   Feel free to connect with us on info@planet-odoo.com

 

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