Weighted Average Method

Under the weighted average method of inventory accounting, the average cost of each item in inventory is the weighted average of the cost of all of the items in inventory at the end of the period. The weighted average is determined by dividing the total cost of inventory available by the total number of units of inventory available, remembering that the beginning inventory is included in both totals. This method is particularly suitable for homogenous products and a periodic inventory system. See also specific identification method and FIFO method and moving average method and LIFO method.