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-   -   Weighted average (https://www.askmehelpdesk.com/showthread.php?t=345242)

  • Apr 23, 2009, 01:32 PM
    jtraver79
    Weighted average
    I am having trouble figuring out the weighted average cost inventory method, do you know an easier way of calculating it. I have tried doing it from what the book says but keep falling short in the answer.
  • Apr 23, 2009, 03:50 PM
    morgaine300

    Well, can't tell you if it's "easier" since I don't know what your book is trying to do... :p

    Let's say you have:
    10 units @ $10 = $100
    15 units @ $11 = $165
    12 units @ $12 = $144

    Common error: make sure you include beginning inventory in that. Just cause it doesn't say "purchase" on it doesn't mean it wasn't purchased at some point.

    Don't ever try to average the 3 prices. Add up the total units (37). Then add up the total cost ($409). You actually have a total of 37 units, so like any average, you're dividing by the total number you have:
    $409/37 = $11.05 (rounded)

    In the end, most people find this easier than FIFO or LIFO.

    Now, if you're doing perpetual, that gets a little more complicated and is kind of a lot of tedious work.

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