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Average cost method

Each time goods are received, a new unit cost of the goods is calculated. Any sale of goods after this uses this calculated cost per unit until the unit cost is recalculated when there is another receipt of goods. This is illustrated in the table below.


Goods Closing Balance

Purchased Sold Average Unit Cost Number of Units Monthly Total



$
$
20XX




Mar 20 at $20 each
20 20 400
Apr 20 at $24 each
22 40 880
May
20 at $22 each 22 20 440
Jul 30 at $27 each
25 50 1,250
Aug
30 at $25 each 25 20 500
Oct 30 at $30 each
28 50 1,400
Nov
20 at 428 each 28 30 840

April: unit cost = (20 X $20 = $400 + 20 X $24 = 480)= 400 + 480 = 880/40 = 22

July: unit cost = (20 X $22 = $440 + 30 X $27 = $810) = 440 + 810 = 1,250/50 =25

October: unit cost = (20 X $25 = 500 + 30 X $30 = 900) = 500 + 900 = 1,400/50 = 28

The closing stock has the value of $840 as at end of November 20XX

Last Updated (Saturday, 09 October 2010 20:00)