BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -What Is Average Cost Method? Average cost method assigns a cost to inventory items based on the total cost of goods purchased or produced in a period divided by the total number of items purchased or produced. Average cost method is also known as weighted-average method.

Detailed explanation-2: -What is Weighted Average Cost (WAC)? 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.

Detailed explanation-3: -FIFO is an inventory valuation method where the first purchased goods are sold first. Weighted average method uses the average inventory levels to calculate inventory value. FIFO is the most commonly used inventory valuation method. Usage of weighted average method is less compared to FIFO.

Detailed explanation-4: -Weighted average periodic is probably the easiest of all the inventory methods. Since the calculation is done at the end of the period, we figure out the total cost of goods available for sale and divide by the number of units. It is helpful to separate the purchases from the sales.

Detailed explanation-5: -Let’s take a look at the basic differences. FIFO-“First In, First Out”, is when the latest received amount is sold first. AVCO-“weighted average cost method” compute the weighted average cost of the quantity held after each inventory acquisition takes place.