UOM Meaning Explained: Why Purchase and Sales Quantities Differ

What is Unit of Measure (UOM)?

Often companies purchase an item and sell that item in smaller portions. You might purchase a 20-foot piece of pipe and sell it by the foot. A unit of measure (UOM) allows you to buy in bulk and sell that item in smaller pieces. For example, you might purchase a 20-foot length of ¾-inch PVC pipe and sell it by the foot. When you receive one length of pipe, your inventory increases by 20 feet.

Unit of measure is especially useful when the quantity you purchase differs from the quantity you sell. You might purchase a 55-gallon drum of chemical and sell it by the gallon, buy a container of refrigerant and sell it by the pound, or purchase pipe in ten-foot sections and sell it by the foot.

Units of measure commonly involve weight, volume, and length and are used to compare quantities and prices.

A Summary of Unit of Measure

When using a unit of measure system, you purchase an item in purchase units and track or sell it in smaller base units.

Consider a 10-foot stick of copper pipe that costs $10.00. The entire stick is the purchase unit. When you sell that pipe by the foot, each one-foot section is a base unit.

When you purchase the stick of copper, you enter a quantity of one for each 10-foot section you wish to purchase.

If you order five sticks of pipe, your purchase records show that you purchased five items for a total cost of $50.00. These are purchase units.

Your inventory records, however, show that you have 50 feet in stock and ready to sell. The average cost is $1.00 per foot, based on the $50.00 total cost divided by 50 feet.

If you sell five feet of pipe to your customer, you reduce inventory by five feet. You now have 45 feet in stock.

Your purchase records show that you bought five sticks of pipe. Sales records show that you sold five feet. Meanwhile, your inventory records indicate that you have 45 feet remaining, with an inventory value of $45.00.

The key is to keep purchase and sales quantities consistent with the units you use to measure them. This is also an important part of inventory management for contractors, where accurate quantities and costs help businesses track available parts and materials.

Adding a Unit of Measure

When setting up a unit of measure for an inventory item, the following fields define how you purchase, stock, and sell the item.

Type: Select the appropriate measurement type, such as weight, volume, or length.

Abbreviation: A short version of the unit of measure name, useful when space is limited.

Name: A descriptive name for the unit of measure. For example, “25 lb Container of R410A Refrigerant, Sold by the Pound.”

Description: A brief explanation of how the unit of measure is used.

Multiplier: The number of base units contained in one purchase unit. For example, a 250-foot roll of wire contains 250 feet. If you buy it by the roll and sell it by the foot, the multiplier is 250.

Weight

Weight-based units of measure are useful when purchasing a container of material by its total weight and selling smaller quantities by the pound.

For example, consider a 25-pound container of R410A refrigerant.

When you receive the item, multiply the purchase quantity by the number of pounds in each container.

• Purchase example: If you receive two containers, you add 50 pounds to inventory.
• Sales example: If you sell two pounds of refrigerant, you reduce inventory by two pounds.

Volume

Volume-based units of measure are useful when purchasing liquids in containers and selling smaller quantities.

For example, consider a one-gallon container of coil cleaner.

A U.S. gallon contains 128 U.S. fluid ounces, as confirmed in NIST’s general tables of units of measurement.

When the item is received, the quantity is multiplied by the number of fluid ounces in the container.

• Purchase example: If you receive one one-gallon container, you add 128 fluid ounces to inventory.
• Sales example: If you sell two fluid ounces of coil cleaner, you reduce inventory by two fluid ounces.

Length

Length-based units of measure are useful when purchasing materials in longer sections or rolls and selling them by the foot or another smaller unit.

For example, consider a 250-foot roll of 10/3 wire.

When the item is received, the purchase quantity is multiplied by the number of feet in the roll.

• Purchase example: If you receive one roll, you add 250 feet to inventory.
• Sales example: If you sell two feet of wire, you reduce inventory by two feet.

Important Fields on the Inventory Item

When setting up an inventory item with a unit of measure, distinguish between the cost of the entire purchase unit and the cost of each smaller sales unit.

Estimated Purchase Unit Cost: The amount you pay for the entire item, such as a roll of wire or a container of refrigerant. You then divide this purchase unit into smaller quantities.

Estimated Sales Unit Cost: The cost of each individual unit you sell. For example, if a 250-foot roll of wire costs $125, the cost per foot is $0.50.

These costs help you distinguish the amount paid to purchase materials from the cost associated with the quantities sold. Accurate unit costs also support job costing, particularly when tracking the materials used on individual service calls or projects.

Inventory Adjustments

When adjusting inventory quantities, use the same base unit used to track the material on hand.

For example, if you track a 250-foot roll of wire by the foot and discover that 50 feet are missing, reduce inventory by 50 feet. If the entire roll is missing, reduce inventory by 250 feet.

Using the correct unit of measure helps keep recorded quantities consistent with the materials physically available.

Frequently Asked Questions

1. Why do purchase quantities differ from sales quantities?

Purchase and sales quantities may differ because the item is bought in one unit and sold in another. For example, purchasing eight 20-foot sections of copper pipe means you purchased eight sticks, but those sticks contain 160 feet of pipe. If you sell the pipe by the foot, sales and inventory records use feet rather than sticks.

This does not mean you sold more material than you purchased. It means the quantities are recorded using different units of measure.

2. What happens if I sell an entire container instead of a smaller quantity?

If you sell an entire container, such as a full roll of wire, it is helpful to maintain a separate inventory item for the full container and another for the individual units if both are sold separately.

For example, if you sell both a 12-pack of drinks and individual cans, the package and the individual cans should have separate item numbers. This helps keep inventory quantities and sales records consistent.

3. What is the purpose of a unit of measure multiplier?

The multiplier converts the purchase quantity into the corresponding inventory quantity. If you purchase one 250-foot roll of wire and sell it by the foot, the multiplier is 250. Receiving one roll adds 250 feet to inventory, while selling five feet reduces inventory by five feet.