Weighted average method

Written by Fmi.Online Thursday November 10, 2022
The weighted average method is an inventory costing method that assigns average costs to each piece of inventory when it is sold during the year.

Explanation :

  Retailers and other businesses that keep and sell inventory must keep track of the cost of inventory on hand as well as the cost of inventory that was sold. In theory this sounds simple, but it can be a lot more complex when large companies deal with thousands or even tens of thousands of inventory sku numbers. There are three different types of inventory costing methods: FIFO (First-in, First-out), LIFO (Last-in, Last-out), and Weighted Average.

In a nutshell :

 
  • The weighted average takes into account the relative importance or frequency of some factors in a data set.
  • A weighted average is sometimes more accurate than a simple average.
  • Stock investors use a weighted average to track the cost basis of shares bought at varying times.
top-arrow
Our Courses are designed to boost your career

Launch your career with Fmi’s Learning Pathway

Choose a learning pathway that best meets your needs and ambitions. Not sure which Fmi learning pathway is right for you? Explore our CareerBuddy videos for help and advice.

Investment banking pathway
  • courses-clock60+ hours
  • courses-desktop9 courses

Investment banking offers many exciting career opportunities for students. From Financial Analysts to Investment Management, and Sales & Trading to a wide range of roles in infrastructure such as IT, Risk or Compliance. This pathway is designed to help you understand the investment banking industry, the roles investment banks are recruiting for, and most importantly, help you to develop the practical skills you need to get into the industry and your preferred role whether this be as part of a school leaver, intern or graduate program.

FMI Online Student join-student-img2 FMI Online Student
55,000+ students currently enrolled
Global markets pathway
  • courses-clock70+ hours
  • courses-desktop10 courses

Global markets provide a range of important products and services to corporates, institutions and governments worldwide from executing trades and managing risk to providing quality research content. A key business area in all investment banks, global markets offers a wide range of career paths for students to consider across all functions and at all levels from school leavers to internships through to graduate programs.

FMI Online Student join-student-img2 FMI Online Student
85,000+ students currently enrolled
Asset management pathway
  • courses-clock50+ hours
  • courses-desktop8 courses

The asset management industry is a global industry worth over 100 trillion US dollars. It plays a crucial role in managing the assets of retail and institutional investors, offering a wide range of exciting careers in doing so. If you’re looking to forge a career in asset management, our Asset management pathway is perfect for you. We help you build the skills all asset managers are looking for and explore everything you need to know about the industry and the wide range of roles available in the sector

FMI Online Student join-student-img2 FMI Online Student
100,000+ students currently enrolled