Stock Cost

TRIMS is a perpetual inventory system using the AVCO perpetual stock valuation method. With each receipt of goods the average cost of goods held in stock is calculated. Any future issues of units of stock are then made at that average cost until a new batch of stock is received when the average cost is recalculated.

The AVCO formula used in TRIMS is:

Average Cost = (( Current Stock * Current Average Cost )  + ( Additional Stock * Current Cost Price )) / Total Stock

The following advantages are noted for AVCO:

  • The prices are based on cost, and the method is generally accurate providing the unit price is set carefully.
  • It is a sensible system which operates on the basis that if parts are identical, the prices should also be the same.
  • It avoids involved calculations for every new issue and receipt of stock
  • A valuation method ideally suited to retail