You purchased the same spare part at CRC 2,000 and later at CRC 3,000. Which cost belongs to a unit sold? Weighted average costing uses the quantities and their values rather than selecting an invoice or simply using the latest purchase price. A moving average is recalculated on each valued receipt and used for subsequent issues. Follow one item in one location and currency to see the effect clearly. Purchases between sales matter. Combining all purchases at month end can produce a different cost allocation even though both calculations end with the same quantity of stock.
Assumptions for the calculation
This example uses interchangeable spare parts, CRC costs and no taxes, freight or discounts. The amounts illustrate the calculation, not a tax policy. The IFRS Foundation's IAS 2 summary includes weighted average among cost formulas for ordinarily interchangeable inventories. Confirm the applicable framework and cost components with your accountant. Individually identified equipment may need a different analysis. Selling price is not the inventory valuation base. Before calculating, verify that every quantity uses the same unit and every cost belongs to that unit. A purchase price per carton cannot be applied to individual pieces without the relevant conversion.
Receive forty units, then sixty
The empty warehouse receives forty units at CRC 2,000, creating CRC 80,000 of value and a CRC 2,000 average. It then receives sixty units at CRC 3,000, adding CRC 180,000. The pool now contains one hundred units worth CRC 260,000. Divide total value by total quantity: CRC 260,000 ÷ 100 = CRC 2,600 per unit. Averaging only the two prices would give CRC 2,500 and ignore the larger quantity purchased at CRC 3,000. That shortcut is wrong for this transaction even though it looks like a reasonable average between the two prices.
The working formula is: new average = (previous quantity × previous average + received quantity × receipt cost) ÷ resulting quantity. Here it is (40 × 2,000 + 60 × 3,000) ÷ 100. Keep both receipts so another person can reproduce it. If the recorded average differs, check quantity, currency and captured cost before making an adjustment. The sixty units may have entered another location, or someone may have used a package price. Fixing an input problem by manually forcing the expected average makes the total look right without explaining the underlying records.
Issue twenty-five units at the current average
After those receipts, twenty-five units are sold. Their issue cost is 25 × CRC 2,600 = CRC 65,000. Seventy-five remain, worth CRC 260,000 − CRC 65,000 = CRC 195,000. The average remains CRC 2,600: an issue does not revalue the remaining pool. If the selling price was CRC 4,000 per unit, that price affects revenue but does not change the issue cost. Otherwise a discount offered to a customer would incorrectly alter the value of unsold stock. Keep sales pricing separate from the cost that follows the inventory movement.
A later purchase changes the next issue cost
A third receipt adds twenty-five units at CRC 3,400, or CRC 85,000. The existing seventy-five units are worth CRC 195,000, so the combined one hundred units now total CRC 280,000. The new average is CRC 2,800. A second sale of twenty units costs 20 × CRC 2,800 = CRC 56,000. Eighty units remain worth CRC 224,000. The first sale retains its CRC 65,000 cost; it is not recalculated at CRC 2,800 because a later purchase was more expensive. Keeping the issue cost at the time of each movement explains the result in its actual sequence.
- Initial receipt: 40 units, CRC 80,000, average CRC 2,000.
- Second receipt: 60 units, CRC 180,000; balance 100, average CRC 2,600.
- First issue: 25 units, CRC 65,000 cost; balance 75, value CRC 195,000.
- Third receipt: 25 units, CRC 85,000; balance 100, average CRC 2,800.
- Second issue: 20 units, CRC 56,000 cost; balance 80, value CRC 224,000.
- Value check: CRC 345,000 received = CRC 121,000 issued + CRC 224,000 remaining.
Why a periodic average gives another result
Combining all receipts first gives 125 units worth CRC 345,000, or CRC 2,760 per unit. Under that periodic calculation, the 45 sold units cost CRC 124,200 and the eighty remaining units are worth CRC 220,800. The moving calculation produced CRC 121,000 and CRC 224,000 respectively. The CRC 3,200 difference comes from the sale before the third receipt. It does not establish that either arithmetic calculation is wrong; the procedures differ. When reviewing Tario, use the moving sequence instead of a monthly spreadsheet applying a single later average to every earlier sale.
Check item, location and cost origin in Tario
Tario maintains moving averages by item and location. Valued receipts update the average, while issues carry the current average without revaluing the remainder. Two warehouses may therefore show different costs if their receipt histories differ. The valuation view also identifies the cost origin: a weighted average or an item or catalog cost used as fallback. A fallback cost is not evidence that all receipts have been recorded. Confirm inventory line assignments, location and company currency before comparing values with the ledger. Real transactions also involve rounding and returns, so retain movement costs and compare using the system's precision.
A late receipt needs a review of the recorded sequence; do not assume it will recost earlier sales. For this example, perform both ending checks: 125 received units minus 45 issues leaves eighty, and CRC 345,000 minus CRC 121,000 leaves CRC 224,000. If only the quantity check agrees, investigate the valuation rather than declaring the inventory correct.