Inventory & logistics
Weighted Average Inventory Method: Compare Periodic and Moving Costs
The weighted average inventory method divides a cost pool by its units. The timing of that pool matters: a periodic average uses the period’s available goods, while a moving average is recalculated when new stock arrives. This original exercise keeps the transactions identical so you can isolate that difference.
Read one chronology for both methods
Use one fictional item, measured in pieces. No returns, losses or other costs occur. The two issues are sales quantities, but their selling prices are irrelevant to this cost allocation. All purchases are available before their following issue.
Original stock chronology
Opening: 10 pieces at cost 4, total 40.
Receipt R-11: 10 pieces at cost 8, total 80.
Issue I-11: 10 pieces.
Receipt R-12: 10 pieces at cost 10, total 100.
Issue I-12: 5 pieces.
Calculate the moving averages in order
After R-11, 20 pieces cost 120, so the moving average is 6. I-11 assigns 10 × 6 = 60 to sold goods and leaves 10 pieces costing 60.
After R-12, combine that remaining 60 with the new 100: 20 pieces now cost 160, giving a new average of 8. I-12 assigns 5 × 8 = 40, leaving 15 pieces costing 120. Moving-method issue costs total 60 + 40 = 100. The cost check is 100 + 120 = 220.
Calculate the periodic pool separately
For the whole period, available cost is 40 + 80 + 100 = 220 for 30 pieces. The periodic unit average is 220 ÷ 30 = 22/3, or approximately 7.333333. Total issues are 15 pieces and ending stock is 15 pieces.
Each half of the pool therefore carries exactly 110: periodic COGS is 15 × 22/3 = 110 and periodic ending inventory is also 110. Keep the exact ratio or sufficient precision until the final amount. Multiplying a prematurely rounded 7.33 by 15 gives 109.95 and introduces an avoidable rounding difference.
Explain the two supported answers
OpenStax distinguishes period-end averaging from perpetual calculations based on the stock available at a sale. In our case the later, higher-cost receipt changes the second moving average; the periodic pool spreads all available cost across the period.
Original comparison
Moving average: issue costs 100; ending cost 120.
Periodic average: issue costs 110; ending cost 110.
Both: available cost 220; 15 pieces issued and 15 remaining.
The difference is allocation timing, not an extra purchase or a change in physical quantity.
Avoid averaging the three unit prices equally
The average of 4, 8 and 10 happens to match the periodic weighted average here because all three receipts contain 10 pieces. That shortcut fails when quantities differ. Build the total-cost and total-unit pool explicitly.
For a useful variation, change only the second receipt quantity and rebuild both schedules from that point. Do not keep the old denominator or average an old unit price with a new one without weights. This exercise compares stated teaching methods; selecting or changing a real accounting policy requires the organization’s applicable guidance.
Questions, answered
Why do periodic and moving averages differ here?
They pool costs at different times. The later receipt affects a different set of units under each calculation.
Can I round the average to two decimals immediately?
Early rounding can create a reconciliation difference. Retain precision and apply the stated final-rounding rule.
Sources and examples
ResumizeAI team. Examples are fictional teaching material, not customer results. Replace sample details with your own facts.
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