Explain Average Price Method

Question

Give a brief introduction of the term ‘Average Price Method’?

Answer 1

Average Price Method - is the method through that the value of total assets or expenditures is supposed to be equivalent to the average cost of the total assets or expenditures. Under this method, it is supposed that the cost of inventory is based on the average cost of the goods accessible for sale during the era. It is calculated through dividing the total cost of goods by the total units which give a weighted average unit cost for the units of the closing inventory.