---
title: "Weighted average cost"
description: "What the weighted average cost method is, periodic vs moving weighted average, the formula, and a worked item card example with purchases and issues."
canonical: https://ledgeriano.com/glossary/weighted-average-cost
language: en
publisher: "Ledgeriano"
updated: 2026-11-06
---

# Weighted average cost

> What the weighted average cost method is, periodic vs moving weighted average, the formula, and a worked item card example with purchases and issues.

Weighted average cost is an inventory costing method that values every unit issued at the average cost of the units available, weighted by quantity. In a perpetual system the average is recalculated after each receipt, which is called the moving weighted average; in a periodic system it is calculated once for the whole period.

The moving average changes only when goods come in at a different cost. Issues do not change it, they simply take units out at the current average. This makes the method easy to follow on an item card and smooths out price swings between purchases.

The periodic version divides the total cost of opening stock and all purchases by the total units available, and applies that single rate to every issue in the period. It is simpler to compute by hand but cannot value an issue until the period ends.

IAS 2 permits weighted average for interchangeable items. In [Ledgeriano](https://ledgeriano.com/guides/inventory-cost-accounting) items set to moving weighted average are revalued on every receipt, landed costs included, and issues post at the current average automatically.

```
Moving average after a receipt = (Value on hand + Value received) ÷ (Units on hand + Units received)
Issue value = Units issued × Current average
```

## Example: moving weighted average on an item card

Opening stock is 100 units at 10. The company receives 200 units at 12, issues 150, then receives 100 at 13.

| Movement | Units | Unit cost | Value | Balance units | Balance value | Average |
| --- | --- | --- | --- | --- | --- | --- |
| Opening | 100 | 10.00 | 1,000 | 100 | 1,000 | 10.00 |
| Receipt | 200 | 12.00 | 2,400 | 300 | 3,400 | 11.33 |
| Issue | -150 | 11.33 | -1,700 | 150 | 1,700 | 11.33 |
| Receipt | 100 | 13.00 | 1,300 | 250 | 3,000 | 12.00 |

### Does an issue change the weighted average cost?

No. An issue removes units at the current average, so the average of the remaining units stays the same. Only receipts at a different cost, returns or revaluations change it.

### Which is more common, FIFO or weighted average?

Both are widely used. Weighted average is common for commodities and mixed bulk goods; FIFO for perishable or dated goods where stock really does rotate.

Guide: https://ledgeriano.com/guides/inventory-cost-accounting