FINANCE & INVENTORY VALUATION
Costing method
An inventory costing method assigns costs to stock and cost of sales under the applicable accounting policy. Cost assignment and the physical order in which goods are picked are separate concepts.
COSTING METHOD IN PRACTICE
- Confirm the policyIdentify the framework and approved method.
- Reconcile the inputsMatch quantities, costs and period records.
- Review adjustmentsControl changes, losses and valuation differences.
Use the agreed units, actual records and approved procedures for your operation.
A WORKED EXAMPLE
Ten units at $10. Ten at $14.
In a simplified weighted-average example, ten units at $10 and ten at $14 have a total cost of $240 for 20 units, or $12 each. The physical warehouse may still pick goods using an approved rotation rule. That pick sequence is not the calculation of weighted-average cost.
WHAT THIS MEANS FOR YOUR QUOTE
Agree the requirement before comparing quotes
Use the actual shipment, stock and service requirements. Record the billing unit, included work and responsibility for exceptions.
Put this term to work. Use the 3PL pricing and rates guide for the wider invoice context and the guide to comparing 3PL quotes to compare the same scope, activity profile and billing units.
A LITTLE MORE CONTEXT
Questions about Costing method
Does FIFO picking require FIFO accounting?
No. Physical movement and cost assignment are different decisions.
Is LIFO available under every framework?
No. Verify the applicable accounting requirements.
Is landed cost one interchangeable cost-flow formula?
No. It describes relevant cost components rather than the same concept as FIFO or weighted average.
Source & example notes
IFRS Foundation: IAS 2 inventories.
Sources provide background on the linked topic. Product documentation describes a particular implementation; confirm the rules, contract and procedures that apply to your operation.
Quantities, costs and scenarios are illustrative, not operating targets, approved handling instructions or guarantees. Source guidance reviewed 22 October 2026.
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