What method calculates the cost of goods sold using the average cost of beginning inventory plus purchases?

The weighted-average method calculates the cost of goods sold by taking the average cost of all available inventory, including the beginning inventory and any purchases made during the period. This method assigns a uniform cost to each unit of inventory, which is computed by dividing the total cost of goods available for sale (the sum of the cost of beginning inventory and the cost of purchases) by the total number of units available for sale.

This approach smooths out price fluctuations over time, as it averages the costs instead of relying on the specific costs of items. Therefore, when inventory is sold, the cost of goods sold reflects this average cost, leading to a consistent and straightforward calculation.

Other methods, such as last-in, first-out (LIFO) and first-in, first-out (FIFO), do not use an average cost but instead focus on the order of inventory movement, which can significantly impact the reported cost of goods sold and inventory valuations. The specific identification method assigns the actual cost of each specific item sold, which can be more precise but is not based on averaging all costs.