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Weighted Average Method

>> August 12, 2010

Under weighted average method of material issue, we calculate total cost of material and then it is divided by total units of our material. After this, we can get weight average price and we issue the material at this price. In weighted average method, we give the weight on quantity of material issue, so it is better than simple average method, because with giving weight, we can obtain more representative price of material bought in different times.

Simple Steps to Calculate Weighted Average Price of Material Issue

1st step : To calculate total cost of material

500 units bought @Rs. 3 = 1500
600 units bought @ Rs. 4 = 2400
200 units bought @ Rs. 2 = 400
total cost of material =  Rs. 4300

total no. of units = 1300 units

Weighted Average Price = Total cost / total units = total of WX/ total of W

= 4300/1300 = Rs. 3.30

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