Example of Using Different Units of Measure
This example illustrates how to calculate costs for an item using different units of measure.
Scenario
Consider a jewelry retail business that sells gold rings. The company purchases the rings in dozens, and maintains inventory costs in dozens and single units.
Shipment Quantities and Costs
The company receives five shipments of rings as follows.
|
Shipment No. |
No. of Rings |
Total Shipment Cost |
|---|---|---|
|
1 |
2 dozen |
4,800 USD |
|
2 |
3 dozen |
5,400 USD |
|
3 |
5 dozen |
10,500 USD |
|
4 |
2 dozen |
5,400 USD |
|
5 |
6 dozen |
7,200 USD |
Analysis
Define a primary unit of measure of dozens and a secondary unit of measure of single units. You can calculate two different costs for each shipment using the primary unit of measure and the secondary unit of measure.
Resulting Costs in Primary and Secondary Units of Measure
The costs using the primary versus the secondary units of measure are as follows.
|
Shipment No. |
Cost in Primary Unit of Measure |
Cost in Secondary Unit of Measure |
|---|---|---|
|
1 |
2,400 USD |
200 USD |
|
2 |
1,800 USD |
150 USD |
|
3 |
2,100 USD |
175 USD |
|
4 |
2,700 USD |
225 USD |
|
5 |
1,200 USD |
100 USD |