Perpetual Average Inventory Method Examples Help

Perpetual Average Inventory Method Examples, Concepts, Illustrations, Sample Help Online


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Understanding Perpetual Average Inventory Method


Under average cost method, the cost of ending inventory and cost of goods sold for a period is calculated on the basis of weighted average cost per unit of inventory. Weighted average cost per unit is calculated using the following formula

Weighted Average Unit Cost = Total Cost of Inventory/ Total Units in Inventory
Perpetual Average Inventory Method Example Explanation
Let’s understand the concept with an example.

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Example: Apply Perpetual Average Inventory Method to the given information for the month of March.
Mar 1 Beginning Inventory 60 units @ $15.00 per unit

5 Purchase 140 units @ $15.50 per unit
14 Sale 190 units @ $19.00 per unit
27 Purchase 70 units @ $16.00 per unit
29 Sale 30 units @ $19.50 per unit


Date Purchases Sales Balance
Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total Mar 1 60 $15.00 $900
5 140 $15.50 $2,170 60 $15.00 $900
140 $15.50 $2,170
14 190 $15.35 $2,91610 $15.35$154
27 70 $16.00 $1,120 10$15.35$154
70 $16.00 $1,120 80 $15.92 $1,274
29 30 $15.92 $478 50 $15.92 $796
31 50 $15.92 $796

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