Weighted Average

Views Updated: Dec 15, 2025

Abbreviation

Pronunciation

/ˈweɪtɪd ˈævərɪʤ/

There are two methods to calculate the equivalent units : FIFO and weighted average method.
The weighted average is the sum of the values, but each weighted by a certain coefficient.
Therefore, weighted average costs fall between the extreme cost figures that can result from other methods.
The weighted average cost represents to some degree the various costs experienced in accumulating the goods currently on hand.
The trade stream is then aggregated and operated on to calculate the volume weighted average price ( VWAP ).

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