What is Weighted average cost?
Weighted average cost values stock at the average cost of all units on hand, recalculated as new purchases arrive. Every unit of an item carries the same cost regardless of which consignment it came from.
Weighted average cost values stock at the average cost of all units on hand, recalculated as new purchases arrive. Every unit of an item carries the same cost regardless of which consignment it came from.
In Bangladesh
It suits businesses buying the same item repeatedly at different prices, which describes most wholesale and distribution trade here. It smooths the effect of a single expensive consignment on reported margin.
An example
Using the same purchases, 100 units at BDT 90 and 100 at BDT 110, weighted average values every unit at BDT 100, so 120 sold cost BDT 12,000 and the 80 remaining are worth BDT 8,000.
In SORS ERP
Weighted average is one of the three valuation methods in SORS ERP, with a valuation comparison report so the effect of the method on stock value and margin is visible rather than assumed.
Also called
- In Bangla
- ভারিত গড় ব্যয়
- Also
- Average costing
Questions
Answered plainly, including where the answer is no.
Does the average update on every purchase?
Yes. The cost is recalculated as new stock arrives, which is why a single unusually expensive consignment moves the value of everything on hand rather than only of itself.
See SORS ERP running on your own numbers
A 30-minute demo in Bangla or English, with your products, your VAT setup and your questions.