Discussing the functional behavior of Odoo on product costing methods. According to the costing method selected for the product or its category the inventory products, actual costs have been calculated. Odoo has three costing methods: 1. Standard Price 2. Average Price 3. Real Price

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Product Costing Methods In Odoo

2. INTRODUCTION
Discussing the functional behavior of Odoo on product costing methods.
According to the costing method selected for the product or its category the inventory
products, actual costs have been calculated.
Odoo has three costing methods:
1. Standard Price
2. Average Price
3. Real Price

3. • The Standard Price costing method will be in default if we didn't specify the costing
method in product category form.
• Let's see how the three product costing methods affects the Odoo product's cost price
calculation.

4. 1. Standard Price
• The method which doesn't affects the cost price of the product according to the purchase or
other inventory adjustments.
• The cost price usually needs to be changed manually, in case of products costing method is the
standard price.
• In most of the case, this category of product's price is changed periodically about in a year or
after a specific period.

5. To set a new product category, you have to follow these steps:
CREATE A NEW PRODUCT CATEGORY
Eg: Inventory -> Configuration -> Product -> Product Categories
• Create a category for the standard price

7. Create a product with the created category (standard price)

8. Here the Cost price is manually entered as $10 and selected category for standard price and
quantity on hand is 0

9. To check the functionality let’s make a purchase and check products value on inventory

10. • Here we purchased the standard product greater than product cost price with $15 and
received the products.
• Now let’s checks how this effects on inventory

11. • Here for 10 products, the total inventory value is 100, i.e. it took the actual price
selected on product form by not considering the purchase amount.
• So let's say the standard costing method is not a dynamic and need to change
manually.
• It's same if we purchase and update our quantity on hand with the price less than
cost price.

12. 2. AVERAGE PRICE
• The average price costing method actually varies the cost price according to the total
quantity shipped and the purchase price
• The cost price is actually dynamically calculated and we don't need to specify the cost
price in case of the costing method average price selected
• The cost is calculated on the total average price according to the quantity

13. To check the functionality follow the process:
1. Create product category for average prices

14. 2. Create a product with the same category with cost price $0

16. 3. Created purchase order and received products with 10 units of unit price $20

17. Inventory value $200 is now according to the total of the unit price we purchased and
the product cost price is Updated according to the total_inventory value and total
quantity, after the inventory values also updated with the new cost price.

18. Here cost price Updated $0 to $20.

19. Let's do an another purchase with cost price lower than the exact cost price and can
see the changes on product cost price.

21. Here purchased and received average product again with quantity 5 and unit price $12.
Now the cost price changes as

22. • Here the cost price is updated with the average price as $20 to $17.33.
• Inventory values changed as
• Inventory values are updated according to the new cost price.

23. Here purchased and received average product again with quantity 5 and unit price $12.
Now the cost price changes as

24. 3. REAL PRICE
• The most common and widely used costing method, which actually updates the cost price
of the product according to the last outgoing product in inventory.
• So the removal strategy like LIFO, FIFO, has a major role in this costing method.
• The cost price of the product doesn't changes until a product is removed from inventory by
any of the removal strategies.
• That's why the process is real time and which is accepted widely.
Let’s create the product category for real time costing method

26. • Here we selected the removal strategy as LIFO [Last in First Out] strategy.
• FIFO will be in default.
• The costing method is selected as a real price.
• Then we created a product of the same category real.

29. • Here the cost price is $0 and 0 product in hand.
• So let's do the two purchase with the unit price $20 for 10 products and $10 for the
5 products respectively.
1. Purchase for 10 products with $20 unit price and its inventory value

30. After first purchase the inventory value is 200 for 10 products with $20:

31. Now the product is updated with 10 on hand but cost price is not changed.

33. 2. Second purchase and receive of 5 products with $10

34. After the second purchase the inventory values are update as ($20 * 10 ) + ($10 * 5)
• The cost price of the product doesn't get updated where no outgoing of the product is done
• So let's make a sale of the real product of quantity 4 and check what the changes are taking
place

35. Sale 4 real products and do deliver:

36. • The quantity on hand is updated with 11
• Where we sell 4 from 15 products
• The cost price is Updated with $10 where these sold products are triggered according to
the LIFO strategy and taken the unit price of last outgoing product $10 from the last
purchase

39. Refer this link for more:
https://www.cybrosys.com/blog/product-costing-method-odoo

40. Thank You !
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