Definition Average Cost Pricing. Description.
Average Cost Pricing is a cost pricing method that calculates
the average unit cost by dividing the total cost of goods available for sale
by the total units available for sale. This is done by applying a weighted-average
approach to all the units in the (ending) inventory.
The Average Costing method levels out the effects of cost
increases and decreases, because the cost for the ending inventory calculated
under the method is influenced by all the prices paid during the year and
by the beginning inventory price. The method disregards the fact that more
recent costs are more relevant for income measurement and management decision-making.
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Advanced Micro Economics
"Why do most of the firms apply average cost pricing rather than marginal cost pricing criterion in parctices?" |
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Average Cost Pricing Special Interest Group
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Compare also: Variable
Costing | Absorption
Costing
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