Weighted Average Cost Method

The Weighted Average Cost Method is an accounting approach used to value inventory. Rather than tracking the cost of each item separately, this method calculates an average cost for all items in stock. This is done by taking the total cost of all inventory and dividing it by the total number of items. The result is a single cost per unit used for both pricing and financial reporting. This method helps businesses manage fluctuating costs and simplifies inventory management, making it easier to assess profitability and prepare financial statements.