Each night the NCAS processes inventory transactions for the day in the order in which the transactions occurred. As each transaction is processed, the NCAS also recalculates the average cost for each item at each warehouse. The updated average cost is used to expense an inventory item in the general ledger when that item is issued from inventory.

The system uses two formulae to recalculate average cost: one formula recalculates average cost when the on-hand quantity is greater than zero; the other formula recalculates average cost when the on-hand quantity is less than or equal to zero.