If you’re using the Moving Average, FIFO, or LIFO costing method, you may be wondering how the program calculates your product’s unit cost when you purchase it from your vendor.

The cost of an item as it enters your inventory (through a purchase order or work order) is calculated based on the following factors:

• Vendor unit price (including any discounts)
• Shipping fee/ freight
• any non-vendor costs
• service items on the purchase order
• cost of component items (work orders)

NOTE: inFlow does not include any taxes on the purchase order when calculating the cost.

We’ll use a sample purchase order to help illustrate the above factors in detail.

Vendor Unit Price

You can find the vendor unit price in the Unit Price column in the purchase order. However, if the product has a discount, it will be included in the calculated cost, as displayed in the Sub-Total column of the order.

To get the unit price for each product

Product Subtotal ÷ Product Quantity = Unit Price

Following the example purchase order above, you would get the following values:

Vendor Unit Price (incl. discount)

Product A: $200 ÷ 20  = $10
Product B: $500 ÷ 5  = $100
Product C: $270 ÷ 10  = $27

Freight

If your vendor is charging you freight/shipping fees, you can input that in the Freight field (above the order total).

If you don’t see this field in your purchase order, you’ll need to click the Add Shipping button at the top right to enable shipping.

inFlow takes the amount in the Freight field and distributes it across all stocked products on the purchase order. This distribution is weighted, and it depends on the unit price of the product.

To get the freight value for each product

Unit Price ÷ [Sum of Stocked Products subtotal] * Freight Total = Freight (unit)

Following the example purchase order above, you would get the following values:

Freight (unit)

Product A: $10 ÷  [ $970 ]  * $145.50 = $1.50
Product B: $100 ÷ [ $970 ] * $145.50 = $15
Product C: $27 ÷ [ $970 ] * $145.50 = $4.05

Non-vendor costs

If you need to pay any duties/ import fees/tariffs, you’ll need to record this under the Non-Vendor Cost field (bottom left of the purchase order). These charges should be added only if the payment isn’t going to your vendor. Any extra fees that require you to pay your vendor should go in either the freight field or as a service fee on the order itself, not non-vendor costs.

To get the non-vendor cost value for each product

Unit Price ÷ [Sum of Stocked Products subtotal * [Non-vendor Cost % * Order Subtotal] = Non-vendor cost (unit)

Following the example purchase order above, you would get the following values:

Non-vendor cost (unit)

Product A: $10 ÷  [ $970 ]  * [ 5% * $1042 ] = $0.53711
Product B: $100 ÷ [ $970 ] * [ 5% * $1042 ] = $5.37113
Product C: $27 ÷ [ $970 ] * [ 5% * $1042 ] = $1.4502

It is also possible to input a dollar value instead of a percentage for the Non-Vendor Cost. In this case, it would be:

Unit Price ÷ [Sum of Stocked Products subtotal] * [Non-vendor Cost ($)] = Non-vendor cost (unit)

Service items

If your vendor charges a separate service fee (e.g., polishing, engraving, machining, etc.), inFlow includes the service fee in the cost calculations as well. You would add this service fee to your purchase order as a service-type item.

inFlow will add the service fee to each product’s cost. With this in mind, you may want to make two orders so that the service + related items are separate from the other non-serviced items.

Let’s say you bought some products from your vendor, but only one item has an extra fee for polishing. If you include other items on the same order, then the polishing service fee will be applied to each product (including the ones that weren’t serviced).

To get the service fee for each product

[Unit Price ÷ Sum of Stocked Products subtotal] * Service Total = Service cost (unit)

Following the example purchase order above, you would get the following values:

Service cost (unit)

Product A: $10 ÷ [$1042 – $72] * $72 = $0.74227
Product B: $100 ÷ [$1042 – $72] * $72 = $7.42268
Product C: $27  ÷ [$1042 – $72] * $72 = $2.00412

Putting it all together…

Phew! That’s a lot of math … It’s a good thing inFlow’s doing all the calculations for you! Adding all the above factors together will give you the cost that inFlow uses for your profit calculations:

Cost of Product A = vendor unit price (including any discounts) + shipping fee/ freight + any non-vendor costs + service items on the purchase order

Cost of Product A = $10 + $1.50 + $0.53711 + $0.74227 = $12.77938

We’ve included a final image here of Product A’s unit cost as calculated by the program: