Weighted Average Inventory System

Weighted average inventory system
David Ortiz
University of Phoenix
QRB501
Tuesday June 19, 2012
Prof. Lirio Bernal-SanchezWeighted average
The inventory management technique known as the weighted cost (averages cost) is ameasurement of the total cost of items in an inventory divided by the number of units in the inventory system.
* One advantage of using the weighted average method involves the consistent productcost used. After the accountant calculates the product cost, he uses that cost for all units. This includes the cost used for the ending inventory value as well as the cost of goods sold.
* Anadvantage to this method is the ability to sell any good first during business operations. Other inventory valuation methods are different because they establish that certain goods must be sold first,creating more inventory management activities.
* Production companies are heavy users of the weighted-average inventory valuation method because provides flexibility.
* Process costing systemsmanufacture goods in a continual manner and it could be costing to use other method. Weighted-average valuation allows a company to avoid separating goods out of this system, which is often extremelydifficult.
* Another advantage of using this method is the level of paperwork required. The weighted average method requires the accountant to calculate one cost and to use this cost for allcalculations. The accountant maintains only a few sheets of paper documenting the calculation.
* The calculation used to determine the unit cost under the weighted average method is simpler than that ofalternative methods. This presents another advantage to these companies. The calculation only requires the accountant to complete three steps.
* 1-Add the costs
* 2- Add the units...