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Improving Moving Average Cost (MAC)
Improving Moving Average Cost (MAC)

Find out how we improved MAC to give a more accurate look at the Average Cost from 2022 onward.

Dayvid Lorbiecke avatar
Written by Dayvid Lorbiecke
Updated yesterday

Katana's improvement to its Moving Average Cost (MAC) calculation ensures more accurate financial and inventory records, affecting all transactions from January 1, 2022. This update enhances how cost changes influence existing stock values and related financial documents, ensuring consistency across your data without altering historical entries.

MAC improvement

As this improvement affects all transactions starting from January 1st, 2022, to avoid undesired changes to older data, all transactions before January 1st, 2022 are not recalculated.

Katana saved the MAC for each variant as of December 31st (2021) and used it as the starting point for all cost calculations moving forward.

How cost calculation was improved

The cost calculation was improved so that any update to stock that affects MAC is considered for all related documents as well. This means that all stock movement changes trigger a recalculation of transactions (made after the change). If the changed variant's MAC is used as an input for any other variant, those transactions will be recalculated to match all the changes in the system.

Changes can range from new documents added (sales, purchase and manufacturing orders, stock adjustments, and transfers) to existing documents (updated date, quantities, unit prices, locations) or data being deleted (entire documents or just inventory rows).

For example, if a Purchase order (PO) for material is added to the system after a Manufacturing order (MO) used it as an ingredient, the cost of the manufactured product is recalculated to account for the changes in material cost. If the product is sold before this update of material cost, the cost of goods sold for the sales order is also recalculated, since the cost of one of the products has changed.

Switching to MAC 2.0

All transactions that affect stock levels and their MAC are visible in the inventory intel.

The Inventory intel lists all of variant's stock movements. Open it by clicking on one of the balances (Average cost, Stock balance, etc) or from the stock balance fields on documents by clicking the i-icon.

Katana's Inventory Intel

Katana generated a new row at the beginning of 2022 for all variants in all the locations. The newly generated row saves the MAC prior to the update.

This System generated row contains the variant's stock balance, value in stock, and MAC. This MAC will be the starting balance for new cost calculation.

Unable to find the average cost before January 1st

The improved cost calculation is effective on all the data from the beginning of 2022. Katana uses the December 31st (2021) average cost as the starting balance for all new calculations to avoid any unwanted recalculation to existing user data. Transaction rows before the System generated row are not included in the recalculation with the improved cost calculation.

Want to adjust the MAC?

Stock adjustment can be used to update the MAC (it is not possible to edit items prior to 2022). There are two ways to do this:

  • Manually create a stock adjustment with two rows for the variant which need a changed average cost. The first row should have a negative quantity number to adjust the variant's balance to zero. After that, a second row is needed with a positive quantity in the Adjustment +/- field and the new average cost to Cost per unit field. The result will give you a stock balance of zero and the same quantity brought back to stock with the new unit price.

  • Adjust stock levels with Update stock levels and stock values import. This import is available on the Data Import page under Settings. Update the value in the stock field of the exported file according to the new unit price. When uploading the file back to Katana choose Recalculate Moving Average Cost in Katana for any increase in stock from the uploaded file in the import model. The stock adjustment created from the import will have two rows for each variant where the cost was changed. The first one is to adjust the stock level to 0 and the other with stock levels as they were previously, including the value of stock with the average cost you want.

Inventory period closing

To avoid unwanted recalculation triggered by making changes to previous periods, the inventory period closing feature was released together with MAC calculation improvements.

Your feedback is invaluable. Let us know your thoughts on this article or anything in Katana you'd like to see improved: [email protected]

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