Cost Layer
TL;DR
A specific batch of stock with its own purchase cost — the unit FIFO and LIFO costing methods use to track per-sale margin.
A cost layer is a single lot of an inventory item, recorded with the quantity received and the per-unit cost paid. When you receive 10 iPhone 14 screens at $42 each, that's one cost layer; when you receive 10 more at $48 next month, that's a second cost layer.
Under FIFO, the system depletes the oldest layer first. After selling 5 screens, the first layer drops to 5 units at $42; after 10 more sales, the first layer is exhausted and the next sale begins eating the second layer at $48. Each sale records the COGS from the layer it consumed.
Cost layers are how you get accurate per-sale margin even when supplier prices fluctuate. Average-cost systems don't track layers — they just average — which hides the signal that your supplier raised prices.
Quick answers
What happens to a cost layer when I return stock to a supplier?
The return is recorded against the most recent layer that contained the SKU. The layer's quantity drops by the return count; the cost basis is unchanged. If the layer goes to zero, it's closed.
Can I see cost layers in real time?
Yes. Per-SKU inventory views show every open layer with quantity remaining, cost, and receive date. Useful for spotting old stock that's sitting on the shelf.