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.
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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.
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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