Average prices are something that StoreFeeder is able to calculate for stock.

Each product will have an average cost value tied to it.

**New Products**

For a new product, the average price will start at £0.

If for this product a purchase order is made 10 units are booked in at a cost of £5 each:

**Total Stock Value** = Current Average Price + (Number of Units x Price Per Unit)

**Total Stock Value** = £0 + (10 x £5) = £0 + (£50) = £50.

**Current Average Price** = Total Stock Value ÷ Number of Units Historically Ordered

**Current Average Price** = £50 / 10 = £5.

If the price per unit is changed to say £4 in this example this will also be reflected in the Total Sock Value and thus also the current average price:

**Total Stock Value** = £5 + (10 x £4) = £5 + (£40) = £45.

**Current Average Price** = £45 / 10 = £4.50.

**Making a Sale**

If you make a sale, then the total stock value is updated to reflect the change in stock:

**Total Stock Value** = Current Average Price + (Number of Units x Price Per Unit)

**Total Stock Value** = £4.50 + (9 x £4) = £4.50 + £36 = £40.50

**Current Average Price** = Total Stock Value ÷ Number of Units Historically Ordered

**Current Average Price** = £40.50 / 10 = £4.05.

**Purchase Order**

If a new purchase order is then made, but this time the order is for 10 units at £6 each, according to the formula:

**Total Stock Value** = Current Average Price + (Number of Units x Price Per Unit)

**Total Stock Value** = £4.05 + ((10 x £5) +(10 x £6)) = £4.05 + 110 = 114.05

**Current Average Price** = Total Stock Value ÷ Number of Units Historically Ordered

**Current Average Price** = £114.05 / (10+10) = £ 5.70.

**Price Reset via Stock Zeroing**

If for whatever reason, your number of units in stock would eventually become 0, the average price will remain as is, however once a new order is made, “Current Average Price” becomes the new average.

For instance, if the current average price is £8.50 and the stock goes to 0, £8.50 will be the current average price.

However, if a new order is made for 10 units at £15:

**Current Average Price** = (£15 x 10) ÷ 10

**Current Average Price** = £15

And thus, the Average Price has effectively reset and updated.

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