How to Allocate Cost When You Buy a Coin Collection

To allocate cost when you buy a coin collection, give each coin a share of the price you paid. The usual method is to split the price in proportion to each coin's estimated value. For coins that are all alike, split it evenly. When the seller priced each coin, use those prices. In every case the shares must add up to exactly what you paid.

A collection bought for one price is the most common buy in a coin shop, and the easiest one to get wrong. If you give every coin the same cost, the cheap coins look like losses and the key date looks like a windfall. If you give no cost at all, every sale looks like pure profit until the year-end numbers do not add up. A few minutes of arithmetic at the counter fixes both.

Why the cost of each coin matters

Profit on a coin is the sale price, less what the coin cost, less the fees to sell it. You cannot know the profit on one coin without its cost. Cost per coin also drives:

• Pricing. You need to know your floor before you discount a coin at a show.
• Buying. If last month's estate buys made 30% and this month's made 8%, you want to know which coins dragged it down.
• Inventory value. The value of stock on hand is the sum of the costs of the coins you still have. An accountant will ask for it. Ask yours how they want inventory valued for your business, since the rules depend on how your business is set up.

The three ways to allocate cost

1. By estimated value

Give each coin a share of the price in proportion to what you expect it to sell for. This is the method most dealers use for a mixed collection.

Worked example. You buy a group for $6,800. Your estimates of what each line will sell for:

Line	Quantity	Estimated value	Share of value	Allocated cost
1881-S Morgan dollar, PCGS MS65	1	$325	6.16%	$418.96
1889-CC Morgan dollar, NGC F12	1	$2,200	41.71%	$2,836.02
1921 Morgan dollars, BU roll	20	$1,200	22.75%	$1,546.92
1909-S VDB cent, PCGS VF30	1	$1,550	29.38%	$1,998.10
Total	23	$5,275	100%	$6,800.00

The math for one line: $2,200 divided by $5,275 is 0.4171. Multiply by $6,800 and you get $2,836.02. Do that for each line, then check that the parts add to $6,800.00.

The roll of twenty gets $1,546.92, which is $77.35 a coin. Notice that you paid more than your total estimate ($6,800 against $5,275). That is a warning sign before you even list anything: at these estimates the whole buy loses money. Allocation surfaces that at once.

Use the same kind of estimate for every line. If one line uses a retail price and another a wholesale bid, the split leans toward the retail line. Pick one basis, such as what you expect to sell for, and stick to it.

2. Evenly

Divide the price by the number of coins. Each coin gets the same cost.

Worked example. A roll of 20 common-date Morgan dollars for $1,000 gives each coin $50.00. A lot of 3 coins for $1,000 does not divide cleanly: $333.33 times 3 is $999.99. Put the extra cent on the first coin, so the costs are $333.34, $333.33, and $333.33.

Even splits are right when the coins are alike. They are wrong for a mixed lot. If you split the $6,800 group above evenly across 23 coins, each coin costs $295.65. The 1889-CC Morgan would then look like it made almost $1,900, and every coin in the roll would look like a $236 loss. Neither is true.

3. By the price of each line

Sometimes the seller prices each coin, or you negotiate coin by coin. Then you already have a cost for each line. Record those prices, and check that they add up to what you paid. If they add up to $6,750 and you wrote a check for $6,800, find the missing $50 before you file the paperwork. It is often a coin you added at the end, or a round-up.

How to choose the method

The buy	Method
A mixed collection for one price	By estimated value
A roll, a bag, or a box of the same coin	Evenly
Coins priced one at a time	By the price of each line
A mixed lot where you paid for a few key coins and got the rest as filler	By estimated value, with honest low estimates for the filler

Step by step: allocate the cost at the counter

1. Write down what you paid. Include what you paid the seller. If you also paid to ship the coins to you, decide once whether costs like that go into coin cost, and do it the same way every time.
2. List each line. One line per coin, or one line per group of identical coins with a quantity.
3. Estimate each line. For slabs, use recent auction results for the grade. For raw coins, use your grade and your own sales. Write the estimate for the whole line, not for one coin.
4. Apply the split. Divide each line's estimate by the total estimate, then multiply by the price.
5. Fix the cents. Round each line to the cent. Put any left-over cent on the first line so the total matches.
6. Record the cost on each coin. The cost goes with the coin into inventory, so it is there when the coin sells.
7. Keep the purchase record. Seller, date, what you paid, how you paid (cash, check number), and the invoice number if there is one.

Common mistakes

• Not recording cost at all. A coin with no cost shows 100% profit when it sells. Your best months then look like your worst ones when the year-end numbers catch up.
• Mixing estimate types. Retail on one line and wholesale on another skews the split.
• Splitting evenly across a mixed lot. This is the most common error, and it hides which coins actually made money.
• Forgetting part of the price. If the parts do not add to what you paid, your inventory value is wrong by the difference.
• Changing cost after the sale. If you learn a coin was undergraded, that changes its value, not its cost. Cost is what you paid.
• Losing the link to the purchase. Six months later you want to know whether the estate buy paid off. If each coin does not point back to its purchase, you cannot tell.

Track how the buy performs

The point of cost per coin is to learn from your buys. For each purchase, keep:

• The total cost.
• How many coins have sold.
• The revenue from those sales.
• The profit so far.

A purchase that has sold 9 of 14 coins and is already past its cost is a good buy, even with 5 coins left. A purchase that has sold its best coins and is still under water tells you something about how you priced it.

How CoinManagerPro does it

In CoinManagerPro purchases, you record the seller, date, and payment details, then add each coin, new or already in stock. On the Cost step you enter the total and choose how to split it: by entered cost, evenly across every coin, or by estimated value. The split shows each line's cost before you save, with a per-coin cost for a line with a quantity. Left-over cents go to the first lines, so the parts always add up to the total. If the line costs you entered do not add up to the total, it tells you the difference.

When you record the purchase, the cost of each coin is written to the coin and its history. Each purchase page then shows the total cost, the units sold, the revenue, and the profit. If you change the split later, the cost of each coin is updated. The steps are in the help article on recording a purchase. If you buy from the same sellers often, see contractors for how they can send you their coin lists.

Summary of the method

Write down what you paid. List the coins. Estimate each line on one consistent basis. Split the price in proportion to the estimates, or evenly for identical coins, or by line for coins priced one at a time. Make the cents add up. Record the cost on each coin the day you buy it, and keep the link back to the purchase so you can see later which buys made money.