Inventory

What is Weighted Average Costing (WAC) method in Zoho Inventory?

Weighted Average Costing (WAC) is an inventory valuation method that calculates the average cost of all inventory items. This average cost is then used to determine the Cost of Goods Sold (COGS) and the value of your remaining stock .

Here’s How the Weighted Average Cost Is Calculated (WAC):

The Weighted Average Cost (WAC) method calculates the total value of available quantities and divides it by the total quantity available.

In simple terms,

Let’s break it down with an example,

1. Initial Transaction:

2. Weighted Average Costing (WAC) Calculation:

This means every unit of stock is now valued at 16.67.

3. Sales Transaction

Here’s How the Weighted Average Costing (WAC) Is Then Updated:

With Moving Average Costing/Perpetual Average, the WAC is recalculated every time you add new stock. Here’s an example of how this works:

1. New Transactions

2. Updated WAC:

Here’s how we can calculate the updated Weighted Average Costing:

Applying this formula, we get:

3. Sale after update: