Item Valuation Rate in Ledger not matching sum of BOM for same Item


Let me run through a scenario:

I have an item, and when I look at the BOM for that Item, the “Total Cost” is listed as $50.36.
Now, when I view that item in the Stock Ledger, it tells me that it’s Valuation Rate is $26.49.
How can this be? How is this rate determined? Shouldn’t the Valuation Rate be determined by the cost of goods (BOM) + operations costs for the item?

“Valuation Method” for the item is set as “Moving Average”.
Stock Settings are set to use “FIFO” as the “Default Valuation Method”.

I’m experiencing this for another Item as well, but in this case the Valuation Rate is higher than the Total Cost of the BOM.

What is going on here?


In moving average valuation method , the cost of each inventory item in stock is re-calculated after every inventory purchase. The valuation rate is combined with Total cost and an average of purchase made for the item.

Hope this helps.


Thank you. But the item(s) in question are not “Purchase Items”, they are “Sale Items” only. Why would this affect such items? Should I set these Items as “FIFO” instead? If so, it seems that I can’t change the valuation method for an Item without recreating it first. Is this correct?

Also, should "Stock Settings —>“Default Valuation Method” be set to FIFO or Moving Average? Should it match what my items are set to?

Sorry for all the questions.