What is Weighted Average Cost in Retail? Explained

Weighted Average Cost (WAC) in the retail industry is a method of calculating the average cost of inventory items, considering the different costs associated with various units. It is determined by multiplying the cost per unit of each item by the number of units, summing these values, and dividing by the total number of units. This method provides a more accurate representation of the average cost when the purchase prices of inventory items vary. WAC is essential for financial reporting, inventory valuation, and cost management in retail businesses. It helps retailers assess the overall cost of goods sold and determine profitability.