Average Group Costing
Group Average Costing calculates a single weighted average cost across ALL locations for each inventory item, rather than maintaining separate average costs per location.
Overview
Average Group Costing Concept
═══════════════════════════════════════════════════════════════════════════════
┌─────────────────────────────────────────────────────────────────────────────┐
│ ITEM: Widget A │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ Location A Location B Location C │
│ ┌─────────┐ ┌─────────┐ ┌─────────┐ │
│ │ 100 qty │ │ 50 qty │ │ 75 qty │ │
│ │ @ $10 │ │ @ $14 │ │ @ $12 │ │
│ │ =$1,000 │ │ = $700 │ │ = $900 │ │
│ └────┬────┘ └────┬────┘ └────┬────┘ │
│ │ │ │ │
│ └───────────────────┼───────────────────┘ │
│ ▼ │
│ ┌─────────────────────────────┐ │
│ │ GROUP AVERAGE COST │ │
│ │ │ │
│ │ Total: 225 units │ │
│ │ Value: $2,600 │ │
│ │ Average: $11.56/unit │ │
│ └─────────────────────────────┘ │
│ │
│ ALL locations use $11.56 for COGS regardless of where item was received │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
Group Average vs Location Average
| Aspect | Group Average | Location Average |
|---|---|---|
| Cost Calculation | One cost for all locations | Separate cost per location |
| Formula | Total Value (all locations) / Total Qty (all locations) | Location Value / Location Qty |
| Transfer Impact | No cost change on transfers | May create cost variance |
| GL Complexity | Simpler - one cost rate | More complex - multiple rates |
| COGS Consistency | Same COGS regardless of ship location | COGS varies by ship location |
| Use Case | Centralized purchasing, uniform pricing | Location-specific pricing, profit centers |
| Reporting | Easier consolidated reporting | Better location profitability analysis |
| Multi-Subsidiary | Cost shared across subsidiaries | Each subsidiary has own cost |
When to Use Group Average Costing
Ideal Scenarios
Best Fit for Group Average Costing
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✓ Centralized Purchasing
└─ All locations buy from same vendors at negotiated prices
└─ Price differences are timing-related, not location-related
✓ Interchangeable Inventory
└─ Items can ship from any warehouse
└─ No location-specific customization
✓ Simplified Reporting Needs
└─ Focus on company-wide margins
└─ Less concern about location profitability
✓ Frequent Inter-Location Transfers
└─ Inventory moves regularly between locations
└─ Don't want transfer variances
✓ E-commerce / Fulfillment Centers
└─ Ship from optimal location
└─ Consistent COGS regardless of source
Avoid Group Average When
Location Average May Be Better
═══════════════════════════════════════════════════════════════════════════════
✗ Location-Specific Pricing
└─ Different vendors per location
└─ Significant regional price differences
✗ Profit Center Accounting
└─ Need accurate location-level margins
└─ Location managers accountable for profitability
✗ Import vs Domestic
└─ Some locations import (duties, freight)
└─ Other locations buy domestic
✗ Franchise/Consignment Models
└─ Each location has independent economics
└─ Different markup structures
Setup and Configuration
Enable Group Average Costing
Navigation: Setup > Accounting > Accounting Preferences > Items/Transactions
Costing Method Settings
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┌─ Items/Transactions Tab ─────────────────────────────────────────────────────┐
│ │
│ Inventory Costing │
│ ───────────────── │
│ │
│ Default Costing Method: [▼ Average ] │
│ │
│ ☑ Use Group Average Costing ← Enable this checkbox │
│ │
│ ☐ Allow Per-Item Costing Method Override │
│ │
│ Cost Accounting: │
│ ○ Perpetual ← Required for Average │
│ ○ Periodic │
│ │
└──────────────────────────────────────────────────────────────────────────────┘
Prerequisites
| Requirement | Details |
|---|---|
| Perpetual Inventory | Group Average requires perpetual costing system |
| Multi-Location Feature | Must have Multi-Location Inventory enabled |
| No Open Transactions | Recommend switching when inventory is low or at period-end |
| Backup | Always backup before changing costing method |
Costing Preference Path
Setup Path
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Setup
└─► Accounting
└─► Accounting Preferences
└─► Items/Transactions subtab
└─► Inventory section
└─► ☑ Use Group Average Costing
Item-Level Settings
Costing Method on Item Record
Navigation: Lists > Accounting > Items > [Select Item] > Accounting subtab
Item Record - Accounting Tab
═══════════════════════════════════════════════════════════════════════════════
┌─ Accounting Subtab ──────────────────────────────────────────────────────────┐
│ │
│ Costing │
│ ─────── │
│ │
│ Costing Method: [▼ Average - Use Preference ] │
│ │
│ Current Average Cost: $11.56 (Read-only when Group) │
│ │
│ ┌─ Location Costs (Read-Only) ────────────────────────────────────────────┐ │
│ │ Location │ On Hand │ Value │ Avg Cost │ │
│ │───────────────────┼─────────┼────────────┼─────────────────────────────│ │
│ │ Main Warehouse │ 100 │ $1,156.00 │ $11.56 (Group) │ │
│ │ East Warehouse │ 50 │ $ 578.00 │ $11.56 (Group) │ │
│ │ West Warehouse │ 75 │ $ 867.00 │ $11.56 (Group) │ │
│ │───────────────────┼─────────┼────────────┼─────────────────────────────│ │
│ │ TOTAL │ 225 │ $2,601.00 │ $11.56 │ │
│ └─────────────────────────────────────────────────────────────────────────┘ │
│ │
└──────────────────────────────────────────────────────────────────────────────┘
Note: With Group Average, all locations show the SAME average cost
Key Behaviors
Cost Pooling
How Group Average Pools Costs
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Transaction 1: Purchase Receipt at Location A
100 units @ $10.00 = $1,000
Transaction 2: Purchase Receipt at Location B
50 units @ $14.00 = $700
Transaction 3: Purchase Receipt at Location C
75 units @ $12.00 = $900
─────────────────────────────────────────────────────────────────────────────
GROUP CALCULATION:
Total Quantity = 100 + 50 + 75 = 225 units
Total Value = $1,000 + $700 + $900 = $2,600
Group Average Cost = $2,600 / 225 = $11.5556
Rounded: $11.56 per unit
─────────────────────────────────────────────────────────────────────────────
RESULT: All 225 units across all locations valued at $11.56 each
Regardless of original purchase price or location
Sales from Any Location
COGS Calculation - Group Average
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Scenario: Sell 30 units
Location A Location B Location C
────────── ────────── ──────────
Sale from Location A: COGS = 30 × $11.56 = $346.80
Sale from Location B: COGS = 30 × $11.56 = $346.80
Sale from Location C: COGS = 30 × $11.56 = $346.80
▲ ▲ ▲
│ │ │
└─────────────┴─────────────┘
│
SAME COGS regardless
of shipping location!
SuiteQL Queries
View Group Average Cost
-- Get current group average cost for items
SELECT
i.itemid AS item_name,
i.displayname,
il.quantityonhand AS total_qty,
il.averagecost AS group_avg_cost,
il.quantityonhand * il.averagecost AS total_value
FROM
item i
JOIN inventoryitemlocations il ON i.id = il.item
WHERE
i.itemtype = 'InvtPart'
AND il.quantityonhand > 0
ORDER BY
i.itemid
Compare Costs Across Locations
-- View inventory value by location (all using group average)
SELECT
i.itemid AS item_name,
l.name AS location_name,
il.quantityonhand AS qty,
il.averagecost AS avg_cost,
il.quantityonhand * il.averagecost AS location_value
FROM
item i
JOIN inventoryitemlocations il ON i.id = il.item
JOIN location l ON il.location = l.id
WHERE
i.itemtype = 'InvtPart'
AND il.quantityonhand > 0
ORDER BY
i.itemid, l.name
Audit Cost Changes
-- Track group average cost changes over time
SELECT
t.trandate,
t.tranid,
tt.name AS tran_type,
i.itemid,
tl.quantity,
tl.rate AS unit_cost,
tl.amount AS line_value
FROM
transaction t
JOIN transactionline tl ON t.id = tl.transaction
JOIN transactiontype tt ON t.type = tt.id
JOIN item i ON tl.item = i.id
WHERE
i.itemid = 'WIDGET-A'
AND t.trandate >= ADD_MONTHS(SYSDATE, -3)
ORDER BY
t.trandate DESC
Important Considerations
Changing to Group Average
warning
Changing costing methods affects historical data and GL balances. Plan carefully!
| Consideration | Impact |
|---|---|
| Existing Inventory | Values will be recalculated using group average |
| Open Transactions | May need to be processed or voided |
| Historical Reports | Past COGS may look different |
| Cost Engine | Will reprocess affected transactions |
Multi-Subsidiary Environments
Group Average in OneWorld
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Subsidiary A (US) Subsidiary B (UK) Subsidiary C (EU)
│ │ │
▼ ▼ ▼
┌─────────┐ ┌─────────┐ ┌─────────┐
│ 100 @ $10│ │ 50 @ £8 │ │ 75 @ €9 │
└────┬────┘ └────┬────┘ └────┬────┘
│ │ │
│ (Converted to base currency - USD) │
│ │ │
└─────────────────────────┼─────────────────────────┘
▼
┌─────────────────────┐
│ GROUP AVERAGE │
│ (in base currency) │
│ │
│ 225 units @ $11.56 │
└─────────────────────┘
Note: Currency conversion happens before averaging
Next Steps
- Calculation Logic - Detailed formulas and examples
- Multi-Location Scenarios - Complex transfer scenarios
- GL Impact - Journal entries and accounting
- Migration Guide - Switching costing methods