Materials
Weighted Average Cost of Inventory
Calculating inventory value based on the average cost of all units available for sale.
W
Updated 2025-10-01
Definition
Weighted average cost assigns the same value to each unit in inventory by dividing the total cost of goods available by the total units available.
Overview
Overview
This method smooths out price fluctuations and provides a consistent inventory valuation for accounting and financial reporting.
Calculation
- Total cost of goods available ÷ Total units available
- Helps in determining cost of goods sold (COGS)
Example
A company has 100 units at $10 and 200 units at $12. The weighted average cost is (($10100)+($12200))/300 = $11.33 per unit.
Tags
#Inventory Valuation#Weighted Average#Accounting#Materials#Cost Management
Related Terms
Unit Cost
LIFO (Last-In, First-Out)
FIFO (First-In, First-Out)
