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Understanding Moving Average Cost (MAC)

Gain a better understanding of how Average Cost works

Dayvid Lorbiecke avatar
Written by Dayvid Lorbiecke
Updated over 2 weeks ago

Understanding the Moving Average Cost (MAC) in Katana is essential for accurate inventory valuation.


What is MAC?

Moving Average Cost (MAC) is Katana’s inventory costing method. It calculates the average unit cost of an item by dividing the total stock value by the quantity in stock.

After each incoming stock transaction, the MAC is recalculated to include the cost of new items. Outgoing transactions do not change MAC — they use the current MAC to value the stock leaving inventory.

Katana only supports the MAC method (FIFO/LIFO are not supported).


An example of how MAC works:

First purchase

  • Buy 10 pcs of Material X @ $10 each.

  • Total stock value = 10 × $10 = $100

  • MAC = $100 ÷ 10 pcs = $10


Second purchase (different price)

  • Buy 5 pcs @ $13 each.

  • Purchased value = 5 × $13 = $65

  • New total stock value = $100 + $65 = $165

  • New total stock = 10 + 5 = 15 pcs

  • MAC = $165 ÷ 15 pcs = $11


Outgoing usage

  • Use 8 pcs to manufacture Product Y.

  • MAC stays $11 for remaining stock.

  • Used value = 8 × $11 = $88

  • New total value = $165 − $88 = $77

  • New quantity = 15 − 8 = 7 pcs

  • MAC = $77 ÷ 7 pcs = $11


Special Considerations

MAC by Location

  • MAC is location-specific.

  • Different purchase prices or manufacturing costs at each location mean each location can have its own MAC.

Past document changes


What affects MAC

Affects MAC

Does not affect MAC

Purchases (different prices)

Sales orders

Adding costs to received POs

Negative stock adjustments

Positive stock adjustments (with unit cost)

Stock transfers from origin location

Stock transfers to destination location

Materials used in manufacturing

Manufacturing finished products

Incoming stock from any source

Notes:

  • Adding costs to a received PO changes stock value and triggers MAC recalculation.

  • Stock transfers affect the destination location’s MAC (keeps origin MAC if different).

  • Manufacturing adds new products with manufacturing costs to inventory.


Fixing inventory or MAC issues

If MAC or inventory values are incorrect:

Option 1 – Backdate Orders

  • If still in an open inventory period, backdate the order to adjust MAC historically.

Option 2 – Stock Adjustments

  1. Create a negative stock adjustment to bring quantity to zero (removes old MAC).

  2. Create a positive stock adjustment to re-add the correct quantity with the desired unit cost.

  • This can also be done via spreadsheet import of stock levels and values.


Result: Understanding MAC ensures accurate inventory valuation, proper COGS calculation, and consistency between Katana and your accounting.


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