Average costing, also known as weighted average costing, is a method of cost accounting that assigns an average cost to each unit of production when items have a high degree of similarity. It is useful for inventory management and financial reporting.
A system of costing applied to industries where production methods are continuous, such as in electricity generation and bottling. This system uses average costing to determine unit cost by dividing the total production cost by the number of items produced.
A costing system applied to production carried out by a series of chemical or operational stages or processes. Characterized by the accumulation of costs for the whole production process and computation of average unit costs at each stage.
