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Take A QuizUnder the 'average cost method', it is assumed that the cost of inventory is based on the average cost of the goods available for sale during the period.
The average cost is computed by dividing the total cost of goods available for sale by the total units available for sale. This gives a weighted-average unit cost that is applied to the units in the ending inventory.
There are two commonly used average cost methods: Simple weighted-average cost method and perpetual weighted-average cost method.
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