What is the weighted average cost method?

The weighted average cost (AVCO) method calculates a single average cost per unit by dividing the total cost of all inventory available for sale by the total number of units available. That average is then used to value both cost of goods sold and ending inventory.

How is weighted average cost different from FIFO or LIFO?

FIFO assigns the oldest costs to COGS and the newest costs to ending inventory. LIFO does the reverse. AVCO smooths out price fluctuations by using a single blended cost for all units, producing results that fall between FIFO and LIFO when prices are rising or falling.

When should I use the weighted average cost method?

AVCO is ideal when inventory units are indistinguishable from each other (fungible goods like grain, fuel, or bulk commodities) and when you want to avoid the income volatility that FIFO or LIFO can create during periods of fluctuating prices.

Is the weighted average method accepted under GAAP and IFRS?

Yes. The weighted average cost method is accepted under both US GAAP and IFRS. LIFO is permitted under US GAAP but prohibited under IFRS, making AVCO a common choice for companies reporting under international standards.

What happens if I add more purchases after some units have been sold?

This calculator uses the periodic weighted average, meaning all purchases for the period are pooled first, then one average is applied. If you need a moving (perpetual) average that recalculates after each purchase, you would recalculate the average each time new stock arrives.

Weighted Average Inventory

Name: Weighted Average Inventory
Availability: InStock
Author: Nham Vu

Enter your inventory purchase lots to calculate weighted average cost per unit, ending inventory value, and cost of goods sold.

Purchase Lots

Units Sold

Total units sold during the period.

Results

Add purchase lots and click Calculate to see results.

Avg Cost / Unit

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Total Units Available

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Cost of Goods Sold

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Ending Inventory Value

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Lot Breakdown

Lot	Units	Unit Cost	Total Cost

Summary

Enter your inventory purchase lots to calculate weighted average cost per unit, ending inventory value, and cost of goods sold.

How it works

Add each inventory purchase lot: a label, quantity purchased, and unit cost.
Enter the number of units sold during the period.
Click "Calculate" to compute the weighted average cost per unit.
The tool multiplies units sold by the average cost to get cost of goods sold (COGS).
Remaining units are multiplied by the average cost to get ending inventory value.
Review the lot breakdown table and the summary totals.

Use cases

Value ending inventory on a balance sheet using the AVCO method.
Compute COGS for an income statement when using weighted average costing.
Compare AVCO results against FIFO and LIFO to choose a costing method.
Verify manually computed weighted average figures before filing financial statements.
Teach or study the weighted average cost method with a clear lot breakdown.
Estimate tax liability under the average cost inventory method.

Frequently Asked Questions

Last updated: 2026-06-11 · Reviewed by Nham Vu