Weighted Average Cost (WAC) Method
The Weighted Average Cost (WAC) method calculates inventory value based on the average cost of all units available for sale during a period. It smooths out price fluctuations, providing a balanced approach to cost tracking. WAC is widely used in industries where identical items are purchased at different prices over time. It simplifies accounting, avoids the complexities of FIFO and LIFO, and offers consistent profit margins. Businesses benefit from stable pricing strategies, simplified bookkeeping, and easier tax reporting. However, it may not reflect the most current market costs. WAC works best for companies selling large volumes of similar products.