How Business Central calculates average cost — and why it matters

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One of the most common questions in inventory accounting is how Business Central calculates average cost. In this post, we break down the logic using a simple two-day example that shows how opening balances, purchases, and sales transactions continuously update average cost. You’ll see how each receipt influences outbound costing, how inventory value is recalculated daily, and why this matters for accurate COGS reporting. We also explain how locations and variants maintain separate cost pools fo