The Weighted Average is an optional Costing Method that can be chosen on the Above-Store Actual vs Theoretical Analysis report and is a more advanced Costing Method due to the fact that it considers quantity at the time the cost is recorded to provide a more .

To understand Weighted Average better, let's take a look at the example below. This example lists the count details for a period, which spans the month of February, and begins with 3 cases of potatoes at \$16.00/case from January's Ending Inventory Count.

 Date Units Price Per Unit Total Value Description January 31 3 \$16.00 \$48.00 Beginning Inventory February 2 10 \$20.00 \$200.00 Purchased February 9 10 \$18.00 \$180.00 Purchased February 16 10 \$22.00 \$220.00 Purchased Total 33 Cases \$76.00 \$648.00 –

At the end of the month, the system will calculate the per-unit weighted average of the Beginning Inventory and all purchases.

 [(3 x \$16.00) + (10 x \$20.00) + (10 x \$18.00) + (10 x \$22.00)] / (3 + 10 + 10 + 10) = \$19.64 per case

OR

 \$648 / 33 Total Cases = \$19.64 per case

If the Standard Average is used, then the calculation of the above numbers would be as follows:

 ( \$16.00 + \$20.00 + \$18.00 + \$22.00) / 4 = \$19.00 per case

At the end of the month, the final count is 12 cases. In using the per case cost, the amounts will be listed as follows:

• Weighted Average: 12 cases x \$19.64 per case = \$235.68
• Standard Average:  12 cases x \$19.00 per case = \$228.00

There is roughly a \$7 variance between the Weighted Average and the Standard Average in this scenario. Using the Weighted Average rather than the Standard Average provides a greater level of precision when calculating costs.