Item Model Groups
Overview
An Item Model Group is a reusable configuration template that you assign to an item. It answers two questions for every item in your system:
- How is this item's inventory value calculated? — determined by the chosen inventory model (FIFO, LIFO, Weighted Average, or Standard Cost).
- Is this item physically tracked in the warehouse? — determined by the Stocked product flag.
Rather than configuring these rules on each item individually, you define a group once and assign it to as many items as share the same behaviour. For example, all raw materials might share one group using FIFO costing, while finished goods use a Standard Cost group.
This page is found under Setup → Inventory → Item Model Groups in the left navigation.
The Four Inventory Models
Choosing an inventory model is one of the most important decisions in your setup. It governs how the cost of goods sold (COGS) and the remaining inventory value are calculated every time a unit is sold, consumed, or moved.
FIFO — First In, First Out
The oldest units purchased are assumed to be sold first. Each purchase creates a cost layer, and the layers are consumed in chronological order.
| What happens on a sale | Remaining stock value |
|---|---|
| Oldest layers consumed first | Reflects the cost of most recently purchased stock |
Al Baraka receives 10 bottles of Cedarwood Atlas Essential Oil at AED 5/bottle in January, then 10 more at AED 8/bottle in March. Total: 20 bottles.
When they sell 10 bottles, FIFO consumes the January layer first: COGS = 10 × AED 5 = AED 50. Remaining stock: 10 bottles valued at AED 8 each = AED 80.
Best for: Items where the oldest stock should move first, such as products with expiry dates, or when you want the balance sheet to reflect current market prices.
LIFO — Last In, First Out
The most recently purchased units are assumed to be sold first. Newest layers are consumed before older ones.
| What happens on a sale | Remaining stock value |
|---|---|
| Newest layers consumed first | Reflects the cost of oldest stock still on hand |
Same scenario. When Al Baraka sells 10 bottles using LIFO, the March layer is consumed first: COGS = 10 × AED 8 = AED 80. Remaining stock: 10 bottles from January at AED 5 = AED 50.
Best for: Industries where newer stock is physically used before older stock, or when matching recent costs against current revenue is preferred for financial reporting.
Weighted Average (WA)
Every purchase recalculates a single Moving Average Price (MAP) across all units of the item company-wide. Every unit — regardless of when or where it was received — is valued at this one blended cost.
New MAP = (Old stock value + New purchase value) ÷ (Old quantity + New quantity)
| What happens on a sale | Remaining stock value |
|---|---|
| All units share one average cost; that average is used for COGS | All remaining units are still valued at the current MAP |
Al Baraka has 10 bottles at AED 5 (total AED 50). They buy 10 more at AED 8 (total AED 80).
New MAP = (50 + 80) ÷ (10 + 10) = AED 6.50 per bottle.
When they sell 10 bottles: COGS = 10 × AED 6.50 = AED 65. Remaining stock: 10 bottles × AED 6.50 = AED 65.
Best for: Items where individual batch tracking is impractical and a smooth, blended cost is preferable — common for bulk liquids, commodities, and raw materials.
Standard Cost (STD)
A fixed cost per unit is set by the finance or cost accounting team. All units of the item are always valued at this rate, regardless of what was actually paid for them. Any difference between the purchase price and the standard cost is posted automatically as a cost variance in the General Ledger.
| What happens on a sale | Remaining stock value |
|---|---|
| COGS = quantity × standard cost (fixed) | All units valued at standard cost |
Al Baraka sets the standard cost for Golden Amber Eau de Parfum 100ml at AED 7.00.
They receive 10 bottles at AED 8 (actual price). The system records 10 units at AED 7.00 each (standard) and posts a AED 10 unfavourable variance to the GL.
When they sell those 10 bottles: COGS = 10 × AED 7.00 = AED 70, regardless of what was paid.
Best for: Manufacturing environments where production costs are tightly controlled and budgeted, finished goods with stable and predictable costs, and when management wants variance reporting against targets.
The Stocked Product Flag
The Stocked product toggle determines whether the inventory system tracks physical quantities for items assigned to this group.
| Setting | Behaviour |
|---|---|
| On | The item is tracked in the warehouse. Every purchase, sale, movement, and adjustment updates the on-hand quantity at its location. |
| Off | The item is non-stocked. It can appear on purchase orders and invoices, but the system does not maintain inventory records or location quantities for it. |
Al Baraka has two groups that both use Standard Cost:
- STD-COST: Stocked product ON — for bottled perfumes that sit on shelves and need quantity tracking.
- NON-STOCK: Stocked product OFF — for services like delivery fees or consulting charges that appear on invoices but are never physically stored.
More configuration flags (such as controls over physical and financial posting, negative stock allowance, and deferred revenue) are planned for this page in a future release. The Stocked product flag is the only one currently active in the interface.
The Item Model Groups List
The left panel shows all existing groups. Each entry displays:
- Code — the short unique identifier (e.g.
FIFO,WAVG,STD-COST). - Name — the descriptive label (e.g. "First In First Out", "Weighted Average Cost").
- Inventory model — the costing method applied (
FIFO,LIFO,WeightedAvg,StandardCost).
Selecting a group in the list opens its details in the right panel.
Creating an Item Model Group
- Select + New in the toolbar.
- Fill in the fields:
- Code (required) — a short, unique identifier for this group. Maximum 20 characters. This code appears in item records and reports.
- Name (required) — a descriptive label. Maximum 100 characters.
- Inventory model (required) — select one of the four costing methods: FIFO, LIFO, Weighted Average, or Standard Cost.
- In the General information section, set the Stocked product toggle:
- Turn it on if items in this group are physically stored and tracked in the warehouse.
- Leave it off for services, intangible items, or anything that does not require warehouse tracking.
- Select Save.
Choose the inventory model carefully before assigning the group to any items. Changing the costing method later requires reassigning items and can have significant financial reporting implications.
Editing an Item Model Group
- Select the group from the list.
- Update the Name, Inventory model, or Stocked product flag as needed.
- Select Save.
Deleting an Item Model Group
- Select the group from the list.
- Select Delete in the toolbar.
A group cannot be deleted if any items are currently assigned to it. Reassign those items to a different group first, then return here to delete.
Validation Rules
| Field | Rule |
|---|---|
| Code | Required · Maximum 20 characters · Must be unique across all groups |
| Name | Required · Maximum 100 characters |
| Inventory model | Required · Must be one of: FIFO, LIFO, Weighted Average, Standard Cost |
| Delete | Blocked if one or more items are assigned to this group |
Planning Your Groups
A well-designed set of groups keeps your costing clean and your reports meaningful. Here is how Al Baraka organised theirs:
| Code | Name | Model | Stocked | Used for |
|---|---|---|---|---|
FIFO | First In First Out | FIFO | ✓ | Standard finished goods |
FIFO-RM | FIFO Raw Materials | FIFO | ✓ | Raw material inputs |
FIFO-NEG | FIFO Allow Negative Stock | FIFO | ✓ | Items that can go negative during high-volume periods |
FIFO-DEFER | FIFO with Deferred Revenue | FIFO | ✓ | Items where revenue recognition is deferred |
WAVG | Weighted Average Cost | Weighted Average | ✓ | Bulk liquids and essential oils |
STD-COST | Standard Cost | Standard Cost | ✓ | Finished perfumes with budgeted production cost |
STD-MFG | Standard Cost Manufacturing | Standard Cost | ✓ | Assembled/manufactured finished goods |
LIFO | Last In First Out | LIFO | ✓ | Items where newest stock is consumed first |
NON-STOCK | Non-Stocked Items | Standard Cost | ✗ | Services and intangible line items |