Example: Weighted Average Cost (WAC)

To calculate the actual cost of products in progress and manufactured products, it is necessary to obtain the unit cost of raw materials. This unit cost is obtained from the weighted average cost of the item according to the Actual Item AS OF File (F76H6112) table. If, for example, you want to obtain the actual cost of products in progress and manufactured products for period 11, you must obtain the weighted average cost of raw materials for period 11 from the F76H6112 table, as in this example:

Period	Balance (quantity)	Balance (in USD)	Weighted Average Cost
Period 10	100	446	n/a
Period 11	20	118	n/a
Total	120	564	4.7

The system calculates the unit cost of the raw material xx, the value USD 4.7 for the calculation of products in progress and manufactured products. Such value does not update the F4105 table; it is used only for the purpose of calculating the actual cost of products in progress and manufactured products. The as-of calculated unit cost was used for raw materials since the unit cost in the F4105 table at the time of the actual cost calculation is not necessarily the raw material cost corresponding to the run period.

The actual cost calculation process involves running two batches:

• The first batch corresponds to the Actual Cost Simulation report (R76H6812).

  This batch program updates the actual cost calculation and simulates those in the F30026 table, but does not update the F4105 table with the simulated cost. This batch is similar to the Cost Simulation (R30812) program and has the same processing options.

  Note: You must run the Actual Cost Simulation program when working with Method 02 (weighted average cost). It is recommended that you do not modify the processing options for the Actual Cost Simulation program.

• The second batch corresponds to the cost generation, or freezing, of actual costs obtained from the Item Actual Cost Component (R76H6835) program.

  This batch may be run in proof or final mode. The final mode freezes the cost in the F30026 table, updates the F4105 table with the unit cost calculated for products in progress and manufactured products according to the 02 weighted average cost costing method, and updates the F76H6105 table. This batch is similar to the R30835 cost freezing standard program and has the same processing options though it does not update the accounting.

  Note: Both batches must be run for Method 02 (weighted average cost). It is recommended that you do not modify the processing options for the Actual Cost Simulation - Build (R76H6812) program.

It is important that the localized As Of process be run to enable the system to obtain the appropriate unit cost of raw materials.