FIFO to Weighted Average Transition
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FIFO to Weighted Average Transition
FIFO: first in, first out
FIFO assumes that the earliest stock purchased is sold first.
- The batch bought most recently
- The batch bought earliest
- The batch with the highest price
Weighted average
Weighted average cost per unit = total cost of all available stock ÷ total number of units.
Batch
Units bought
Cost per unit
A
8
$14
B
12
$17
- FIFO
- Weighted average
- Both methods give the same cost
Try another stock example
Use each batch's quantity and unit cost to calculate the weighted average before finding the sale and closing stock values.
3 printable pages
Page 1
Page 2
Page 3
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