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Average cost method is a method of accounting which assumes that the cost of inventory is based on the average cost of the goods available for sale during the period.[1]
The average cost is computed by dividing the total cost of goods available for sale by the total units available for sale. This gives a weighted-average unit cost that is applied to the units in the ending inventory.
There are two commonly used average cost methods: Simple weighted-average cost method and perpetual weighted-average cost method.[2]
^Bragg, Steven (2023-12-07). "Average cost method definition". AccountingTools. Retrieved 2023-12-31.
^Kieso; Weygandt; Warfield; Young; Wiecek (2007). Intermediate Accounting 8th Canadian Edition. John Wiley & Sons Canada. p. 447. ISBN 978-0-470-83979-9.
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