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Costing method used in the company is AVCO and the customer wants to use sales and purchase order synchronization for the inter-branch transfers

Here is the scenario:

Step 1: Purchasing the product at different costs
Purchase 10 qty of the product at 10 P and receive it - Cost becomes P 10
Purchase 10 qty of the product at 15 P and receive it - Cost becomes P 12.5
( 10 * 10 + 10 * 15 ) / 20 = 250 / 20 = 12.5


Step 2: Doing an Inter Branch transfer of stock through Sales and Purchase order synchronization
a) Created a PO requesting 10 qty of the product at 0 P
b) An SO is created on the other side, confirmed and delivered the product
c) Received the product on the other side

Cost becomes P 6.25

Sales = 10 * 12.5 = 125 and hence inventory valuation becomes 100 + 150 - 125 = 125 and hence the cost of the product becomes 125 / 20 = 6.25


Since it was an inter branch transfer we expect that the cost of the product should remain 12.5 P.

Please provide your suggestions

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