As a business, it’s vital to calculate your average moving cost, or weighted average, to aid in financial and market analysis. Use our free moving average calculator to automatically determine your average moving cost, or follow the manual formula below.
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What Is Moving Average and How to Calculate It
What Are Average Moving Costs?
Average moving costs, sometimes known as weighted average costs, are used to calculate the average cost of inventory items over time. You typically use this method in inventory valuation and cost accounting.
Moving average costs are handy when inventory costs fluctuate significantly or when it’s challenging to assign specific costs to individual units due to constant changes in purchase prices.
QuickBooks Average Moving Cost Calculator
Using our free average moving cost calculator is straightforward. However, you will need to gather relevant information, like your cost of goods and the total number of units in inventory.
To use our calculator, input the relevant information, and we will automatically deduce your average moving costs.
The Average Moving Cost Formula
The formula is relatively straightforward and involves dividing the total cost of goods for sale by the number of total units.
Average Moving Cost = Total Cost of Goods for Sale / Total Number of Units Available
How to Calculate Moving Average Cost
Here's a step-by-step process to calculate moving average costs:
- Determine the total cost of goods available for sale. This includes the cost of beginning inventory and any additional purchases made during a specified period.
- Determine the total number of units available for sale by counting the total number of units in inventory, including the units from the beginning and the units purchased during the period.
- Divide the total cost of goods available for sale by the total number of units available for sale. This calculation provides the moving average cost per unit.
You calculate the average moving cost by dividing the total cost of goods for sale by the total number of units available. As you make new purchases, you add them to the existing inventory and update the average cost, ensuring that the average cost reflects the most recent purchase prices.
How QuickBooks Can Help
Tracking your moving average cost is essential for getting an accurate picture of your inventory value, helping businesses to make accurate financial reports and analyses.
QuickBooks inventory management software allows you to set up your inventory items and enter the initial quantities and costs for each item. This ensures you correctly categorize your inventory items and assign them to the appropriate accounts.
To start using QuickBooks inventory management software, sign up for QuickBooks Online Plus today or start your 30-day free trial.
