Understanding Unit Cost on Inventory Ledger Entries (ILE) vs. Purchase Orders

The Unit Cost on an Inventory Ledger Entry (ILE) may not exactly match the Unit Cost on the Purchase Order. This is expected behavior.

The calculation works as follows:

ILE Unit Cost = Total Cost ÷ Base Quantity

For example:

• Purchase Order Unit Cost = 24.86
• Base Quantity = 125.2
• Total Cost = 24.86 × 125.2 = 3,112.47

The ILE Unit Cost is then calculated as:

3,112.47 ÷ 125.2 = 24.8600...

One important detail is that Total Cost is stored with only two decimal places. Because the system calculates the ILE Unit Cost from the rounded Total Cost rather than directly from the Purchase Order Unit Cost, a very small rounding difference can occur.

The system follows this approach because Total Cost must correctly account for several factors, including:

• Line discounts
• Unit of measure conversions (for example, purchasing in Each, Box, or Case while inventory is stored in the base unit)
• Foreign currency exchange rate conversions when purchasing from international vendors

Calculating the Unit Cost from the final posted Total Cost ensures that the inventory valuation matches the financial posting exactly.

As a result, it is normal for the inventory's base unit cost to differ slightly from the Purchase Order unit cost due to rounding. These differences are typically very small and are considered immaterial.