Weighted Average Method Definition
Weighted Average Method Definition:
Issuing materials at an average cost assumes that each lot taken from the storeroom is composed of uniform quantities from each shipment in stock at the date of issue. Weighted average price is calculated by dividing the total cost of materials in stock at any time by the total quantity of materials in hand by that time. In this method average cost of materials purchased is charged to production rather than actual cost.
Relevant terms:
Other Related Accounting Articles:
- Last In First Out (LIFO) Method Definition
- First in First Out – FIFO Method Definition
- Direct Material Price Variance
- First In First Out (FIFO) – Materials and Inventory Costing Method
- Specific Cost Method Definition
- Average Balance
- Materials Quantity Variance Definition
- Explaining Assets in terms of Accounting
- Perpetual Inventory System Definition
- Inventory Valuation Methods
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