How to calculate average cost of goods

Calculating the amount of the forthcoming investment and procurement, it is sometimes necessary to calculate the average cost of the goods. However, when the goods are heterogeneous, the conventional methods of calculating average cost is not good. In this case, use weighted grades.

Instruction

1. You first need to understand why the usual method, the average valuation of the product is not suitable for use. Price list of any company involved in the trade, usually several hundred SKUs. It rarely happens that they are the productof the mi-substitutes, competing with each other. This range is ineffective and generally leads to a contraction of demand, rather than expansion and revenue growth. So usually every company tries to occupy a niche in different product groups. It is obvious that to calculate the average cost of goods by dividing the total price by the number of positions is impossible. The resulting number will reflect "the average temperature in the hospital".
2. Therefore, the more accurate is the calculation of the average arithmetic weighed. It is produced in two stages. To calculate average cost of goods, break the range into groups of homogeneous goods can be compared by price. Within each group determine the average cost of conventional products division of price by quantity. Next, find the proportion of each group in total production volume.
3. Then, to calculate average cost of goods, multiply the percentage of each group in the total number of products at the appropriate average prices. Thus obtained, the final price will be much more accurately reflect the average cost of the goods. However, even this option may not be suitable, if products is too heterogeneous, for example, food products and industrial goods. In this case it is more correct to calculate average cost of goods for each product.