Vertical Financials
Costs & Inventory

Weighted Average Cost (WAC)

Definition

An inventory costing method that values every unit at the average cost of all units available, recalculated as new inventory arrives.

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Formula

Weighted Average Cost = Total Cost of Units Available ÷ Total Units Available

WAC smooths out price swings between shipments and is common in inventory apps and QuickBooks. It is simple and easy to explain.

It still needs full landed cost in each shipment's cost. Watch for: freight and duties added months after receipt, which leaves early sales costed too low.

Example

You have 1,000 units at $10 and receive 500 more at $13. The new average cost is ($10,000 + $6,500) ÷ 1,500 = $11.00 per unit.

Related terms

FIFO (First In, First Out)LIFO (Last In, First Out)Inventory ValuationCOGS (Cost of Goods Sold)

Terms that reference this

FIFO (First In, First Out)Inventory ValuationLIFO (Last In, First Out)
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