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Weighted Average Method Definition:

Issuing materials at an average cost assumes that each lot taken from the storeroom is composed of uniform quantities from each shipment in stock at the date of issue. Weighted average price is calculated by dividing the total cost of materials in stock at any time by the total quantity of materials in hand by that time. In this method average cost of materials purchased is charged to production rather than actual cost.

Relevant terms:

• First in first out (FIFO) Method
• Last in first out (LIFO) method

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