For many years the price of fuel has always been calculated on the LIFO (Last In First Out) method of accounting. Until the major fuel fluctuations that was the best and easiest way to figure out fuel margins.
Due to these high daily fluctuations on the price of each grade it is now imperative to consider how much fuel is in stock and as well as the cost of the fuel. Adding the new fuel and new cost to what’s already in stock then averaging it out is called the WAM margin (Weighted Average Margin).
S2k.net now does the following calculation each day shown in inventory history which can be accessed by right clicking on the light bulb in the cost column for the grade you would like to view:
In the screenshot below you can see the purchases (lines in bold type), sales (lines highlighted in green), stick readings (in the # In Stock column) and over and short (in italics) for unleaded fuel and what happens each day in S2k.
Weighted Average Cost Calculation
Below, you will see a sample of numbers and how they are calculated to get the weighted cost per gallon.
1) The text in bold indicates a fuel delivery and the price at which that grade was purchased. (Bottom 2 lines show that there was 2 deliveries that day)
2) The $ 2.2796 on 1/6 in bold is the actual cost per gallon on that day of fuel purchased.
3) The 5,133 and 6,225 are the new quantities delivered.
4) The 10,519 is the new in stock quantity adding the 1st delivery and the in- stock quantity.
5) The 627701550 is the invoice reference, the entity reference will be the delivery company name.
6) The 2 lines highlighted in green show “Sales” and the reason there are 2 sales lines is because this is a blended site and one sale is from the unleaded fuel and one is from the plus (blended fuel).
7) The Over/Short is the gallons that are over/short on that day.
8) The $
2.2787 is the new WAM for that tank on the 6th. Here is the
calculation:
In stock at the end of 1/5/2007 = 4,294 gallons
Old WAM
price was $ 2.2762
1st new Purchase = 6,225 at 2.2796
New WAM
for that delivery = (4,294 * $ 2.2762) = $ 9,774.00 +
New Delivery =
(6,225 * $ 2.2796) = $ 14,190.51 +
Added Delivery = (5,133 * $ 2.2796) = $
11,701.19
Total fuel Dollars = $ 35,665.69
Total Fuel = 15,652
Gallons
therefore new WAM = $ 35,665.69 / 15,652 = $
2.2787
So even though fuel was purchased at $ 2.2796, the actual
cost from this tank is $ 2.2787. In this case the difference is small but if you
are a slower moving station the difference can be significant.