What Is a Moving Weighted Average?

The moving weighted average method refers to a method of calculating the average unit cost of materials by taking the weight of each batch of materials and the balance of the previous batch of materials as the weight when the company conducts material detail classification and calculation based on actual costs. With this pricing method, a weighted average unit price is recalculated for each batch of materials purchased, which is used as the unit cost of the materials received. ^[1]

Moving weighted average

The moving weighted average method is a term for the weighted average method under the perpetual system.

Moving weighted average method:

Moving weighted average

Example 1: Goods A, the opening balance of 10, the weighted price of 10, the amount is 100, the business occurred as follows:

Purchase 10 first, purchase price 11; then sell 10;

The cost calculation process is as follows:

At the time of sale, the initial cost amount is 10 * 10 = 100; the current purchase cost: 10 * 11 = 110. The balance after sales: 10;

After purchase, the balance unit price is: (10 * 10 + 10 * 11) / (10 + 10) = 10.5, and the cost of sales is 10.5

Here we must pay attention to the sequence of the occurrence of business. If it is sold first, then the purchase becomes: the balance after sales ^[2] is 0

Cost of sales is 10 * 10 = 100

Post-purchase cost is (0 * 10 + 10 * 11) / 10 = 11

The new corporate income tax law has eliminated the last-in-first-out method, leaving only the first-in-first-out method, weighted average method, individual pricing method, and moving weighted average method included in the weighted average method