The weighted-average cost method allocates the cost of interchangeable inventory using a weighted-average price in an agreed manner. If ten units are purchased at 100 and ten at 140, the average cost is 120. Selling twelve units in the periodic educational model gives a cost of 1440 and a remaining balance of 960. A moving average after each receipt may produce a different result when the operations occur in a different sequence. The method allocates cost; it does not describe the physical order of the items and does not remove the need to check net realizable value separately.
How to avoid an error
The average here is weighted by quantity; it is not the simple average of the prices of batches of arbitrary size. In the example, both batches arrive before the sale; there are no discounts, delivery costs or taxes. The balance check is straightforward: the expense and ending cost together must preserve the total purchase cost of 2400 until separate losses or a write-down are recorded.
For more on the connection between cost and write-downs: [educational analysis](/guides/inventory-cost-nrv/).
Sources and limits of review
Basis: **report-ias2**. The example is editorial. The sources explain the concept but do not confirm the reliability of anyone’s financial statements or the suitability of a decision for a particular investor.
General educational models; IFRS is mentioned only to the stated extent; not a statement of current Russian rules.
Source reference and link retained: report-ias2 and /guides/inventory-cost-nrv/; ten units at 100, ten units at 140, average 120, sale of twelve units, cost 1440, balance 960, total purchase cost 2400, periodic versus moving average, discounts, delivery, taxes, losses, write-downs and net-realizable-value caveats preserved.
Educational material is not individual investment, legal or tax advice.
