A professional tool for investors, accountants, and business owners to accurately value inventory and stock portfolios.
Lot / Batch 1
Number of shares or items purchased.
Cost per single share or item.
Lot / Batch 2
Lot / Batch 3 (Optional)
Lot / Batch 4 (Optional)
Weighted Average Price
$52.17
Total Quantity
300
Total Cost Basis
$15,650.00
Highest Price Paid
$55.00
Formula Used: Total Cost Basis ÷ Total Quantity = Weighted Average Price.
Detailed Breakdown
Batch
Quantity
Unit Price
Total Cost
Weight %
Table 1: Detailed breakdown of inventory lots and their contribution to the average.
Price Variance Analysis
Figure 1: Comparison of individual batch prices versus the calculated weighted average price.
What is the Weighted Average Price?
When managing financial assets or inventory, simply averaging the unit prices does not give you an accurate picture of your true costs. You must calculate the weighted average price to understand the real value of your holdings. This metric is essential for investors performing dollar-cost averaging, warehouse managers dealing with inventory valuation, and businesses tracking the cost of goods sold (COGS).
The weighted average price takes into account the proportional relevance of each component. For example, buying 10 shares at $100 has less impact on your average cost than buying 1,000 shares at $50. By weighting the price by the quantity purchased, you arrive at a figure that reflects your true financial break-even point.
{primary_keyword} Formula and Mathematical Explanation
To accurately calculate the weighted average price, you cannot just add the prices and divide by the number of transactions. Instead, you must calculate the total expenditure and divide it by the total number of units.
The mathematical formula is:
WAP = ( Σ (Price × Quantity) ) / Σ Quantity
Where Σ (Sigma) represents the sum of all individual lots or batches.
Variable
Meaning
Unit
Typical Range
Price (P)
Cost per single unit
Currency ($)
0.01 – ∞
Quantity (Q)
Number of units in a batch
Count
1 – ∞
Total Cost
Sum of all (P × Q)
Currency ($)
Variable
Practical Examples (Real-World Use Cases)
Example 1: Stock Market Investing
An investor buys shares of a tech company in three separate transactions to dollar-cost average into the position.
Purchase 1: 10 shares @ $150
Purchase 2: 20 shares @ $140
Purchase 3: 50 shares @ $130
Calculation:
Total Cost = (10×150) + (20×140) + (50×130) = 1,500 + 2,800 + 6,500 = $10,800.
Total Shares = 10 + 20 + 50 = 80. Weighted Average Price: $10,800 / 80 = $135.00 per share.
Example 2: Retail Inventory
A retailer imports T-shirts in two batches with different supplier costs.
Batch A: 500 shirts @ $5.00
Batch B: 2,000 shirts @ $4.50
Even though the prices are close, the larger volume of Batch B pulls the average down significantly.
Total Cost = $2,500 + $9,000 = $11,500. Total Units = 2,500.
Result: $4.60 per shirt. This becomes the basis for setting profit margins.
How to Use This {primary_keyword} Calculator
Enter Batch Details: Input the Quantity and Price per Unit for your first transaction in the "Lot / Batch 1" section.
Add More Lots: Enter subsequent purchases in Batch 2, 3, and 4. If you have fewer batches, leave the extra fields blank.
Review Results: The tool instantly updates the primary weighted average price in the green box.
Analyze the Chart: Look at the "Price Variance Analysis" chart to visually compare which batches were above or below your calculated average.
Copy Data: Use the "Copy Results" button to paste the data into your accounting software or spreadsheet.
Key Factors That Affect {primary_keyword} Results
Several financial dynamics influence the outcome when you calculate the weighted average price:
Volume Disparity: A very large order at a low price will drastically lower the average, even if multiple smaller orders were made at high prices.
Price Volatility: High fluctuation in unit costs between batches increases the importance of accurate weighting (as opposed to simple averaging).
Transaction Fees: In strict accounting, brokerage fees or shipping costs should be added to the total cost basis, increasing the effective average price.
Currency Fluctuations: For international inventory, exchange rates at the time of purchase affect the base price.
Inflation: Over long periods, newer inventory tends to cost more, gradually pulling the weighted average upwards.
Stock Splits: In investing, stock splits change the quantity and price but maintain the total cost basis. You must adjust inputs accordingly.
Frequently Asked Questions (FAQ)
Why is weighted average better than simple average?
Simple average treats all transactions equally, ignoring volume. Weighted average respects the financial reality that larger transactions have a bigger impact on your portfolio or inventory value.
Can I use this for crypto trading?
Yes. This calculator is perfect for calculating the average buy-in price for cryptocurrencies like Bitcoin or Ethereum across multiple trades.
Does this calculator handle selling?
No. This tool calculates the average acquisition price. Selling reduces inventory quantity but typically does not change the average cost per unit of the remaining stock (under standard accounting rules).
Is this the same as FIFO or LIFO?
No. Weighted Average Cost (WAC) is a distinct inventory valuation method separate from First-In-First-Out (FIFO) or Last-In-First-Out (LIFO).
What happens if I enter a negative price?
Prices cannot be negative for standard assets. The calculator will treat negative inputs as invalid or calculate them mathematically, but in reality, costs are absolute values.
How do fees affect the calculation?
To include fees, add the total fee for a batch to the total cost of that batch before dividing by quantity, or slightly increase the "Price per Unit" input to reflect the fee.
What is the "Total Cost Basis"?
Total Cost Basis is the sum of all money spent across all batches. It represents your total financial exposure.
Can I calculate weighted average price for services?
Yes, if you hire contractors at different hourly rates for different durations, you can use "Hours" as Quantity and "Hourly Rate" as Price to find the weighted average hourly cost.