Page 33 - MAZOO EBOOK 1_Neat
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Inventory - recognition, measurement and valuation using specific cost method, FIFO and
weighted average cost only
Weighted Average Cost (WAC) Method:
In accounting, the Weighted Average Cost (WAC) method of inventory valuation uses a
weighted average to determine the amount that goes into COGS and inventory. The weighted
average cost method divides the cost of goods available for sale by the number of units available
for sale. The WAC method is permitted under both GAAP and IFRS accounting.
Weighted Average Cost (WAC) Method Formula
The formula for the weighted average cost method is as follows:
Where:
Costs of goods available for sale is calculated as beginning inventory value + purchases.
Units available for sale are the number of units a company can sell or the total number of units
in inventory and is calculated as beginning inventory in units + purchases in units.
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