Accurately determine the value of your inventory with our professional Weighted Average Cost (WAC) calculator. Ideal for accountants, warehouse managers, and small business owners.
WAC Calculator
Beginning Inventory
Quantity of items currently on hand before new purchases.
Please enter a valid non-negative number.
The unit cost of the beginning inventory.
Please enter a valid non-negative cost.
New Purchase Batch #1
Please enter a valid non-negative number.
Please enter a valid non-negative cost.
New Purchase Batch #2 (Optional)
New Purchase Batch #3 (Optional)
Weighted Average Unit Cost
$0.00
(Total Cost / Total Units)
0Total Units Available
$0.00Total Cost of Goods
0%Variance vs Batch 1 Cost
Batch
Units
Unit Cost
Total Batch Cost
Unit Cost Comparison
Individual Batch Unit Cost
Weighted Average Cost
What is the Weighted Average Inventory Cost?
The calculate weighted average inventory cost method (often referred to as WAC) is an accounting valuation technique used to determine the average cost of inventory items available for sale. Unlike specific identification, which tracks the cost of every single item, or FIFO (First-In, First-Out), which assumes the oldest items are sold first, the weighted average method assigns a single average cost to all indistinguishable items in stock.
This approach is particularly useful for businesses dealing with large volumes of identical items—such as fuel, grains, or small hardware components—where tracking individual unit costs is impractical. By smoothing out price fluctuations over an accounting period, it provides a stable cost basis for calculating Cost of Goods Sold (COGS) and ending inventory value.
The mathematical foundation for the weighted average method is straightforward. It is a ratio of the total cost of goods available for sale to the total units available for sale.
WAC Formula: Weighted Average Cost = (Cost of Beginning Inventory + Cost of New Purchases) / (Units in Beginning Inventory + Units Purchased)
Variable Definitions
Variable
Meaning
Unit
Typical Range
Beginning Inventory Cost
Total value of stock at the start of the period
Currency ($)
≥ 0
Purchases
Cost of new inventory acquired during the period
Currency ($)
≥ 0
Total Units
Sum of all physical items available for sale
Count
1 to Millions
WAC Per Unit
The calculated average cost per single item
Currency ($)
Dependent on input costs
Practical Examples of Weighted Average Calculation
Example 1: The Coffee Roaster
Imagine a coffee shop that buys beans in bulk. Prices fluctuate based on the market.
Beginning Inventory: 100 lbs at $5.00/lb = $500
Purchase 1: 200 lbs at $6.00/lb = $1,200
Purchase 2: 100 lbs at $5.50/lb = $550
Total Cost: $500 + $1,200 + $550 = $2,250 Total Units: 100 + 200 + 100 = 400 lbs Calculation: $2,250 / 400 = $5.625 per lb
When the shop sells a pound of coffee, they record the cost as $5.63, regardless of which specific bag of beans was used.
Our tool simplifies the math so you can focus on decision-making.
Enter Beginning Inventory: Input the number of units you had at the start of the period and their unit cost.
Add Purchases: Enter the quantity and unit cost for up to three separate purchase batches. If you have fewer batches, leave the extra fields blank.
Review the Table: The dynamic table breaks down the total cost contribution of each batch.
Analyze the Chart: The visual graph compares the individual unit cost of each batch against the final weighted average, helping you see if recent purchases are driving costs up or down.
Export: Use the "Copy Results" button to paste the data into your spreadsheet or accounting software.
Key Factors That Affect Weighted Average Results
Several financial and operational variables influence the outcome when you calculate weighted average inventory cost:
Market Price Volatility: Rapid changes in supplier prices will pull the average away from your historical costs. In times of inflation, WAC typically yields a lower COGS than LIFO but higher than FIFO.
Purchase Volume: Large batches have a "heavier" weight. A massive purchase at a low price will significantly lower the average, even if subsequent smaller purchases are expensive.
Freight and Duties: The "Cost Per Unit" should ideally include shipping, insurance, and import duties (landed cost) to be accurate.
Inventory Turnover: Fast-moving inventory means your average cost stays closer to current market rates. Slow-moving inventory may result in an average cost that lags behind current prices.
Accounting Consistency: Once you choose to calculate weighted average inventory cost for a tax year, IRS regulations usually require you to stick with it unless you file for a change in accounting method.
Purchase Timing: Buying in bulk before a known price hike can permanently lower your weighted average for that accounting period.
Frequently Asked Questions (FAQ)
Can I use Weighted Average for tax purposes?
Yes, the IRS and many international tax bodies accept the weighted average method, provided it is applied consistently to that class of inventory.
Is WAC better than FIFO or LIFO?
It depends on your business. FIFO is often better for perishable goods, while LIFO can reduce taxes during inflation. WAC offers a middle ground that smooths out price spikes.
How often should I recalculate?
In a periodic inventory system, you calculate it at the end of the period. In a perpetual system, you calculate a new moving average after every purchase.
Does this calculator handle negative inventory?
No, physical inventory cannot be negative. The calculator validates inputs to ensure non-negative values.
What if I have different products?
You must calculate weighted average inventory cost separately for each SKU or product type. Do not mix costs of different items.
How do returns affect the calculation?
Returns to vendors reduce both the total cost and total units available, effectively reversing that portion of the purchase entry.
Does this include labor costs?
For manufacturers, inventory cost includes direct materials, direct labor, and overhead. For retailers, it is usually just the purchase price plus landed costs.
Why is my weighted average exactly the same as one batch?
If all batches have the same unit cost, or if one batch volume is overwhelmingly large compared to others, the average will converge on that specific cost.
Related Tools and Internal Resources
Enhance your financial analysis with our suite of inventory and accounting tools:
FIFO Calculator: Calculate Cost of Goods Sold using the First-In, First-Out method.
LIFO Calculator: Evaluate inventory costs using Last-In, First-Out logic for tax planning.
COGS Calculator: A comprehensive tool to determine your total Cost of Goods Sold for the period.