Average Cost

What is Average Cost?

Average Cost is an inventory management method for determining the cost of goods sold and the value of the closing inventory.

The inventory management method assumes that units are valued at an average cost per unit of all units. The method calculates the average cost per unit by dividing the total cost of goods (opening inventory and purchases during the period) by the total number of units.

For further information on the method see the Wikipedia definition.

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Last modified June 24th, 2013 by Team

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