Products using Lot or Serial control in Acctivate create unique records for each unit (Serial) or group of units (Lot) within a product and warehouse. This design enables the Actual Cost method, which provides the most accurate inventory valuation for Lot and Serial controlled items.
Since Lot and Serial numbers are required on all transactions, Acctivate can track the exact cost associated with each specific Lot or Serial number. This level of detail provides a more accurate Cost of Goods Sold (COGS) than other costing methods such as Average, Standard, or layer-based methods (FIFO/LIFO).
Notice the example in the screenshot below. PC20 is a serial controlled product, on the serial tab of the list window, you'll notice that each serial displays a distinct unit cost.
In the second screenshot, product TP201, which is a Lot controlled product. This time on the Lots tab, you can again see that a unique Unit Cost is assigned to each Lot Number.
The Unit Cost, shown above, is defined by the cost entered on the Inventory Receipt when the Lot/Serial number was brought into inventory.
When selling Lot or Serial controlled products, the specific Lot or Serial number selected determines the cost used for Cost of Goods Sold (COGS).
| Product | Control Type | Lot/Serial Number | COGS (per unit) |
|---|---|---|---|
| PC20 | Serial | 2687867 | $63.72 |
| PC20 | Serial | 98765 | $53.00 |
| TP201 | Lot | 3923 | $1.00 |
| TP201 | Lot | 4510 | $1.75 |
Why Choose Actual Cost Over Other Methods?
Compared to Layer-Based Methods (FIFO/LIFO):
Using FIFO or LIFO costing creates a new cost layer each time a product is received, however, the cost layers have no direct relationship to specific Lots or Serials. In a FIFO transaction, Acctivate will use the cost layer with the oldest available quantity even if that’s not the layer that connects to when the Lot or Serial was received. Actual Cost, on the other hand, directly links cost to the specific Lot or Serial selected.
Compared to Average Cost:
Average Cost uses a running average of previously posted transactions per warehouse, not the true cost tied to the Lot or Serial number. (see the Average Cost Method article).
Compared to Standard Cost:
Standard Cost always uses a single, user-defined cost for all transactions, regardless of the true purchase or receipt cost of the Lot or Serial number.
Setting Actual Cost as the cost method for your Lot/Serial controlled products will ensure that the most accurate Cost Of Goods Sold possible is captured for that product on every sale, every time.
Learn More About Cost Methods in Acctivate