Weighted average inventory valuation method is method in which inventory purchased at any price is put together to calculate one price for allocation in contrast to FIFO or LIFO.
Weighted Average
When using the weighted-average method of inventory valuation, the last step is to divide the total cost of all purchases (including beginning inventory) by the total number of units available for sale. This calculation results in the weighted-average cost per unit. This average cost is then used to value the ending inventory and the cost of goods sold.
Following are inventory valuation methods: 1 - Lifo (Last in first out) 2 - Fifo (First in first out) 3 - Average method.
Average Cost Method: Under this method average cost is calculated by following farmula:Average cost of unit= Total cost of inventory / total number of units
Weighted Average
Weighted Average
Weighted average method which requires to use the weighted average cost per unit of inventory at the time of each sale.
Majority of the companies are following weighted average method to value inventories. In India, the Income Tax authorities only allow FIFO & Weighted Average Method.
When using the weighted-average method of inventory valuation, the last step is to divide the total cost of all purchases (including beginning inventory) by the total number of units available for sale. This calculation results in the weighted-average cost per unit. This average cost is then used to value the ending inventory and the cost of goods sold.
Following are inventory valuation methods: 1 - Lifo (Last in first out) 2 - Fifo (First in first out) 3 - Average method.
Average Cost Method: Under this method average cost is calculated by following farmula:Average cost of unit= Total cost of inventory / total number of units
Weighted Average
The total value of material divided by the total quantiy of stock
A method of inventory accounting in which the oldest remaining items are assumed to have been the first sold. In a period of rising prices, this method yields a higher ending inventory, a lower cost of goods sold, a higher gross profit (assuming constant price), and a higher taxable income. Also called FIFO.Method in calculation in which the weighted averagezzor the period is the cost of the goods available for sale divided by the number of units available for sale. When the perpetual inventory system is used, the weighted average method is called the moving average method.
Inventory valuation methods: 1- LIFO (Last in first out) 2- FIFO (First in first out) 3 - Average Method
The techniques of inventory control are as follows:- 1. First In First Out Method(FIFO) 2.Last In First Out Method(LIFO) 3.Highest In First Out Method(HIFO) 4.Base Stock Method 5.Simple Average Method 6.Weighted Average Method
lifo