Weighted Average Cost

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Weighted Average Cost is a method of calculating Ending Inventory cost. It takes Cost of Goods Available for Sale and divides it by the total amount of goods from Beginning Inventory and Purchases. This gives a Weighted Average Cost per Unit. A physical count is then performed on the ending inventory to determine the amount of goods left. Finally, this amount is multiplied by Weighted Average Cost per Unit to give an estimate of ending inventory cost.

[edit] References

1. Intermediate Accounting 8th Canadian Edition, page 446, Kieso, Weygandt, Warfield, Young, Wiecek, John Wiley & Sons Canada, Ltd, 2007, ISBN 978-0-470-83979-9