There are in fact three ways of calculating inventory valuation in All Orders:
1) Purchase Cost * Quantity This basically calculates the cost as entered or last vendor cost times the Quantity On Hand (see the faq about understanding Quantities in All Orders)
2) FIFO. This costing method basically is the one use by the All Orders Valuation Report and it calculates cost based on the contents of a stack of costs for this item, the oldest cost (first in) is the one picked for the calculation.
3) Average Cost. This is a costing method perpetuated in QB. However the cost of the item is read from QB but calculated in QB.