WAREHOUSE CONTROL & PERFORMANCE
Weighted Average Cost
Weighted average cost assigns a pooled average cost per unit by dividing the included cost by the corresponding quantity. Inventory applications can calculate the average periodically or update it as receipts occur.
WEIGHTED AVERAGE COST IN PRACTICE
- Define the poolUse comparable items and cost scope.
- Weight by quantityCombine included cost and units.
- Apply the averageUse the selected timing method.
Use the agreed units, actual records and approved procedures for your operation.
A WORKED EXAMPLE
100 at $2. 300 at $4.
A hypothetical pool contains 100 units costing $200 and 300 costing $1,200. Total cost is $1,400 for 400 units: $3.50 per unit. Averaging $2 and $4 to get $3 ignores the different quantities.
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 Weighted Average Cost
Is it the unweighted average of prices?
No. Quantities determine the weighting.
Does it remove lot tracking?
No. Financial valuation and physical traceability are different requirements.
Are periodic and moving averages always identical?
No. Transaction timing and the selected method can affect results.
Source & example notes
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 23 October 2026.
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