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Oracle EBS Average Cost After Receipt and PPV Calculator

Whether your organization uses average or standard costing changes what a PO receipt does to the books. Under average costing the receipt changes the item cost, under standard costing the difference goes to purchase price variance. This tool shows both outcomes for the same receipt.

Your numbers

On hand quantity before receipt

units

Current average unit cost

Receipt quantity

units

PO unit price

13.1 $

Standard unit cost (if standard costing)

Quantity issued after receipt

units

Your results

New average unit cost

12.6

Weighted average of existing value and receipt value.

PPV if standard costed

$120

Positive is unfavorable (price above standard); it is a debit to the PPV account.

Inventory value before receipt

$6,200

Inventory value after receipt

$8,820

Change in average cost

0.2

Value of the issue at new average

$3,780

What the issue relieves from inventory at the new average.

Weighted average arithmetic for a single receipt with positive on hand. Negative on hand quantity, cost updates, invoice price variance and landed cost adjustments are not modelled.

Free, optional. Reopen it on any device.

Save results:

New average cost vs PO price

Sweeps PO unit price from 8 to 18, holding your other inputs fixed.

Cost exceptions without custom reports

An optional review of how to flag items with large PPV or average cost movement.

Optional. The tool and every export work without this. No spam.

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How to use it

Enter the quantity and average cost on hand before the receipt, the quantity received and the PO unit price. If the item is also costed at a standard in another organization, enter that standard to see the PPV. The calculator returns the new average cost, the value of inventory after the receipt, and the value of an issue made at the new average. The chart sweeps the PO price so you can see how much a price spike moves your average.

Use the receipt quantity in the primary UOM
Enter the PO price converted to the item's primary UOM
Check the Inventory Value Report after posting to confirm

The formulas

Average costing: new average cost equals (on hand quantity times current average plus receipt quantity times receipt price) divided by (on hand quantity plus receipt quantity). The result is a weighted average and it moves less when on hand is large compared with the receipt. Standard costing: PPV equals (PO price minus standard cost) times receipt quantity. A positive number means the purchase was more expensive than the standard and is booked as unfavorable variance. Oracle Cost Management books the receipt at standard to inventory and the difference to the PPV account.

Worked example

With 500 units at 12.40 on hand and a receipt of 200 at 13.10, existing value is 6,200 and the receipt is 2,620. The combined value of 8,820 over 700 units gives a new average of 12.60, up 0.20. Issuing 300 units at the new average relieves 3,780. If the same item were standard costed at 12.50, the receipt would carry a PPV of 0.60 times 200, or 120 dollars unfavorable. The same purchase therefore shows up in two different places in the two costing methods.

Common mistakes

Issuing before receiving and driving on hand negative produces odd average results, so check for negative balances first. Forgetting the unit of measure conversion between the PO and the item also gives wildly wrong costs. Remember that invoice price differences between PO and invoice create further adjustments, and that landed cost or freight, if not included in the receipt, will not be in this number. When prices swing, review the cost trend by item before month end close.

Frequently Asked Questions

Does a receipt always change average cost?

Under average costing, yes, whenever the receipt price differs from the current average. If the price equals the average, the cost stays the same. The size of the move depends on the receipt size relative to on hand.

What happens if on hand is negative?

The average cost logic differs when a receipt arrives against a negative balance, and results will not match this simple formula. Resolve negative on hand before judging the cost movement.

Is PPV favorable or unfavorable when positive?

In this tool a positive PPV means the PO price was above standard, which is unfavorable and a debit. Negative means the price came in under standard. Check the sign convention in your own reports.

Does this include freight and duties?

No. Only the PO unit price is used. If your process adds freight, duty or other landed cost into the receipt or via adjustments, add it to the price per unit before entering.

If you want an exception list of items whose average cost or PPV moved beyond a threshold, Netray can build it read-only over your EBS cost data.

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