![]() You can use this same method (Weighted Average Inventory Method) to calculate the weighted average inventory for various types of inventory. In this example, the weighted average inventory would be (20% x Raw Materials) + (60% x Finished Goods) + (20% x Work in Progress). The weighted average inventory for your company using the Weighted Average Inventory Method would be the sum of the three weighted average inventory calculations. And for work in progress, you would need to multiply it by its weight and divide it by 20%. You would then need to multiply the finished goods by their weight divided by 60% for finished goods. To calculate the weighted average inventory using the Weighted Average Inventory Method for raw materials, you would need to multiply the raw materials by their weight and divide it by 20%. Assume that raw materials make up 20% of the total value of your inventory, finished goods make up 60% and work in progress makes up the remaining 20%. Finally, multiply every kind of inventory by its weight to find the weighted average cost for that item.įor example, let’s say your company has three types of inventory: raw materials, finished goods and work in progress items. Then, assign a weight to each type of inventory based on its value as a percentage of the total. To calculate the weighted average inventory, using the Weighted Average Inventory Method, you need to first determine the total value of all your company’s inventory. This allows businesses to assess their overall inventory levels more accurately and better manage their stock. The weighted average inventory method is a calculation that assigns a weight to each type of inventory based on its value or importance. What is Weighted Average Inventory? How to Calculate It? Conclusion: Choosing The Right Inventory Valuation Method for Your Business.What are the Other Common Inventory Valuation Methods & How is it Different From the Weighted Average Inventory Method?.Difficult to Calculate in Some Circumstances.Inaccurate Cost Depiction of Individual Items.What are the Benefits and Drawbacks of Applying the Weighted Average Cost (WAC) Method?.Top 3 Applications of Weighted Average Cost.4 Methods to Calculate Weighted Average Cost (WAC).What is Weighted Average Inventory? How to Calculate It?.
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