What is the average price?

, also known as an average method, is the average cost of a strategy that assumes that the average cost of assets or expenditures in the common fund equals the value of the same expenditure or assets. This approach can be used in a number of situations, including determining the average cost of shares that are obtained over time, or calculating the costs associated with products that are at hand and are available for sale. Unlike some methods of cost calculation, the average load with the first or first FIFO accounting and the first or first accounting may be equally well.

One of the simplest ways to understand how the average cost functions are to consider a number of shares of shares issued by specific companies, each purchase occurring over a few months. Chances are the real purchase price of shares vary every time more shares are obtained. Rather than trying to keep up to which shares were purchased by the total number of shares purchasedA value.

For example, if one share is purchased for $ 100 (USD), then another share is purchased for $ 150, the average price is determined by the distribution of combined particles of purchase by the number of shares obtained. In this example, this means that the average cost per share is $ 125. If the investor wanted to sell these two shares later, he would like to get at least $ 125 per share to break even in the store.

businesses sometimes use average costs to determine the current stock costs associated with items held in the inventory. In a situation where a specific replacement component is purchased twice in six weeks and there is a difference in the price paid for each of these purchases, a department that will receive one of these parts charged on the basis of the average cost of two purchases. The fact that the actual cost of the issued component was more or less than other sloŽka, is irrelevant in terms of stocking the cost of stocks. From this point of view, the preparation of budgets for the coming year is also suitable for average costs, as the average price for the necessary goods shows an increase in the previous period and will allow this to justify an increase in a certain line item.