Weighted-average cost flow assumption

The weighted-average cost flow assumption is a costing method that is used to assign costs to inventory and the cost of goods sold. Under this approach, the cost of goods available for sale is divided by the number of units produced in the period to arrive at an average cost per unit. This amount is then assigned to the units sold in the period and the units remaining in stock. This method is only used when the periodic inventory system is in place.