What are Base Cost, Unit Cost, and Average Cost — and how are they used?
DigitBridge tracks product costs at multiple levels to give your team visibility into margins, profitability, and pricing decisions. This guide defines the different cost fields in the system and explains how they’re calculated, when they’re used, and why they matter.
Base Cost
The raw cost of goods before any additional charges.
The Base Cost is the foundational cost of the item — typically what you pay your vendor per unit before any added expenses like shipping, duty, or handling. This is usually the most stable number and is often pulled from your vendor agreement or invoice.
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Where it comes from: Sourced directly from vendor pricing or P/O line items.
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When it's used: Acts as the starting point for calculating final landed costs.
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Why it matters: Essential for understanding your base margin and for pricing decisions.
Unit Cost
The final landed cost per unit after allocations.
The Unit Cost includes the base cost plus any allocated costs such as shipping, handling, duty, or other charges you distribute across items. This represents the true per-unit cost to your business.
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Where it comes from: Calculated automatically when cost allocation is used (e.g., via the A/P Options tool in a P/O Receive).
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When it's used: Used for margin calculations and inventory valuation.
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Why it matters: Gives a complete view of product cost to support pricing, profitability, and reporting.
Average Cost
A running average across multiple purchases.
The Average Cost reflects the system-wide running average of what you've paid for the item over time. It updates automatically as new costs are entered through inventory receipts.
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Where it comes from: System-generated based on historical receiving data.
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When it's used: Used for inventory valuation and cost-of-goods-sold (COGS) in accounting.
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Why it matters: Smooths out cost fluctuations for reporting and forecasting.
Why These Fields Are Important
Each of these fields plays a different role depending on your workflows:
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Sales & Pricing Teams may look at Base or Unit Cost to set markup and pricing strategies.
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Finance Teams rely on Average Cost for inventory valuation and COGS reporting.
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Receiving & Operations Teams often enter cost updates that feed all three fields.
Tip: Consistently entering and allocating costs ensures that your cost fields remain accurate and that margin calculations are trustworthy.
Note: For information on where to see, edit, or add cost information, check out this guide.