Weighted Average Cost Method

The Weighted Average Cost Method is relatively easy approach to costing inventory. It assigns the same unit cost to all units available for sale during the period.

Common situations in which the Weight Average Cost Method is used:

• Inventory items are so intermingled that it is impossible to assign a specific cost to an individual unit.
• The accounting system is not sufficiently sophisticated to track FIFO or LIFO inventory layers.
• Inventory items are so commoditized (i.e., identical to each other) that there is now way to assign a cost to an individual unit.

Input Variables:

I - Beginning Inventory

COGP- Cost of Goods Purchased

U - Units Available for Sale

Output for Formula:

Returns the Weighted Average Cost