Calculate inventory cost using the weighted average method. Divide total cost by total units for a blended cost per unit across all purchases.
The Weighted Average Cost (WAC) method calculates a single blended cost per unit by dividing the total cost of goods available for sale by the total number of units available. This average cost is then applied to both COGS and ending inventory, eliminating the need to track individual cost layers.
WAC is popular because of its simplicity and is accepted under both US GAAP and IFRS. It smooths out price fluctuations, providing a stable cost per unit that avoids the extremes of FIFO (low COGS in inflation) and LIFO (high COGS in inflation).
This calculator lets you enter multiple purchase lots and units sold. It computes the weighted average cost per unit, COGS, and ending inventory value — saving time compared to manual computation.
Supply-chain managers, warehouse operators, and shipping coordinators rely on precise weighted average cost data to maintain efficiency and control costs across complex distribution networks. Revisit this calculator whenever conditions change to keep your logistics plans aligned with real-world performance.
WAC is the simplest costing method to administer. It requires no tracking of individual cost layers and produces results that fall between FIFO and LIFO. This calculator instantly produces the blended cost per unit, COGS, and ending inventory from your purchase data. Real-time recalculation lets you model different scenarios quickly, ensuring your logistics decisions are backed by accurate, up-to-date numbers.
WAC = Total Cost of Goods Available / Total Units Available COGS = Units Sold × WAC Ending Inventory = Remaining Units × WAC
Result: WAC = $11.20/unit; COGS = $1,344
Total cost = (100 × $10) + (150 × $12) = $1,000 + $1,800 = $2,800. Total units = 250. WAC = $2,800 / 250 = $11.20. COGS = 120 × $11.20 = $1,344. Ending inventory = 130 × $11.20 = $1,456.
In a periodic system, WAC is calculated once at the end of the period using all purchases. In a perpetual system, the average is recalculated after each purchase, and COGS is recorded at the running average. Perpetual WAC produces slightly different results than periodic WAC due to the timing of recalculations.
Businesses with thousands of transactions and similar-cost items (e.g., commodity goods, fasteners, chemicals) find WAC the most practical method. The administrative simplicity of a single average cost per SKU reduces accounting labor and audit risk.
In a rising price environment, WAC COGS falls between FIFO (lowest COGS) and LIFO (highest COGS). This makes WAC a balanced choice that avoids the extreme tax effects of LIFO while providing a more realistic COGS than FIFO.
The WAC method divides the total cost of all inventory available for sale by the total number of units available. This blended cost per unit is used for both COGS and ending inventory valuation.
A simple average adds up unit costs and divides by the number of lots. WAC weights each lot by its quantity, giving larger lots proportionally more influence on the average. WAC is the correct method for inventory costing.
In a perpetual weighted average system, the average cost is recalculated every time a new purchase is received. Sales between purchases use the most recently calculated average cost.
Yes. IFRS allows both FIFO and weighted average cost. LIFO is prohibited under IFRS, making WAC the primary alternative to FIFO for international companies.
WAC smooths cost variations, which can obscure price trends. In rapidly changing price environments, it may not accurately reflect the cost to replace inventory or the most recent acquisition costs.
Yes. WAC is an accepted inventory costing method for tax purposes under both US and international tax regulations. It provides a middle-ground tax outcome between FIFO and LIFO.