How to Manage Costing Method in Odoo 18 | What are the Different Types of Costing Method in Odoo 18
6In Odoo 18, costing methods determine how product costs are calculated and tracked within the inventory management system. Selecting the appropriate costing method is crucial for accurate inventory valuation and financial reporting. Odoo 18 offers three primary costing methods:
Standard Price (Standard Costing):
Description: In this method, each product is assigned a fixed cost manually. The cost remains constant regardless of purchase price fluctuations or inventory transactions.
Use Case: Suitable for products with stable costs or where manual control over cost is preferred.
Configuration: Set the costing method to "Standard Price" in the product category settings.
Average Cost (AVCO):
Description: This method calculates the cost of inventory items based on the average cost of all similar items available in stock. The average is updated with each purchase, reflecting the combined cost of existing and newly acquired stock.
Use Case: Ideal for businesses where product costs fluctuate frequently, providing a balanced cost perspective.
Configuration: Choose "Average Cost" as the costing method in the product category settings.
First In, First Out (FIFO):
Description: FIFO assumes that the oldest inventory items are sold or used first. The cost of goods sold is based on the cost of the earliest purchased items still in stock.
Use Case: Commonly used in industries dealing with perishable goods or products with a limited shelf life.
Configuration: Select "First In, First Out" as the costing method in the product category settings.
To configure these costing methods in Odoo 18:
Navigate to the Inventory module.
Go to Configuration -- Product Categories.
Select an existing category or create a new one.
In the Inventory Valuation section, choose the desired Costing Method (Standard Price, Average Cost, or First In, First Out).
Save the changes.
By appropriately setting the costing method for each product category, businesses can ensure accurate inventory valuation and financial reporting in Odoo 18.
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