Under 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 i.....
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http://en.wikipedia.org/wiki/Average_cost_method
Average cost method, also called weighted average, is a way of assigning costs to inventory when it is sold. Some companies choose to use the average method instead of other valuation methods like FIFO or LIFO because the?weighted average method?minimizes the drastic effects of assigning costs based on the purchase date.
Found on
https://www.myaccountingcourse.com/accounting-dictionary/accounting-diction
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