Weighted average cost is an inventory valuation method that values every unit at the average cost of all units available, recalculated as new stock is bought or once per period.
It smooths out price swings and suits interchangeable goods bought often at varying prices. It's permitted under IFRS, Indian and UK accounting standards, and US GAAP.
FORMULA
Average cost per unit = total cost of units available ÷ number of units available