The average costing method, also known as the weighted average cost method, calculates the cost of inventory by taking the average cost of all similar items available during a period. It smooths out price fluctuations by applying a consistent cost to units sold and those remaining in inventory. This method is simple to use and is commonly applied in businesses with large volumes of similar inventory items.The average costing method offers several unique advantages that can be especially beneficial for small businesses:
Cost Efficiency
Consistent Pricing
Tax Benefits