How to find weighted average unit cost?
Understand the Problem
The question is asking for the steps to calculate the weighted average unit cost, which involves finding the average cost of units while considering the different weights (quantities) of those units. This typically includes summing the total costs and dividing by the total quantity of units.
Answer
The weighted average unit cost is calculated using the formula: $$ \text{Weighted Average Unit Cost} = \frac{C_1 \cdot Q_1 + C_2 \cdot Q_2 + C_3 \cdot Q_3}{Q_1 + Q_2 + Q_3} $$
Answer for screen readers
The weighted average unit cost is given by the formula: $$ \text{Weighted Average Unit Cost} = \frac{C_1 \cdot Q_1 + C_2 \cdot Q_2 + C_3 \cdot Q_3}{Q_1 + Q_2 + Q_3} $$
Steps to Solve
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Identify the Costs and Weights First, list out the costs of each unit and their corresponding quantities (weights). For example, if you have three products with costs (C_1, C_2, C_3) and their quantities (Q_1, Q_2, Q_3).
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Calculate Total Cost Next, calculate the total cost by multiplying each unit cost by its quantity and summing the results: $$ \text{Total Cost} = C_1 \cdot Q_1 + C_2 \cdot Q_2 + C_3 \cdot Q_3 $$
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Calculate Total Quantity Now sum the quantities to find the total number of units: $$ \text{Total Quantity} = Q_1 + Q_2 + Q_3 $$
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Calculate the Weighted Average Unit Cost Finally, divide the total cost by the total quantity to find the weighted average unit cost: $$ \text{Weighted Average Unit Cost} = \frac{\text{Total Cost}}{\text{Total Quantity}} $$
The weighted average unit cost is given by the formula: $$ \text{Weighted Average Unit Cost} = \frac{C_1 \cdot Q_1 + C_2 \cdot Q_2 + C_3 \cdot Q_3}{Q_1 + Q_2 + Q_3} $$
More Information
The weighted average unit cost is often used in financial analysis and inventory management to determine the average cost of goods sold. It's particularly useful for businesses that sell products at varying prices and quantities.
Tips
- Forgetting to multiply each unit cost by its corresponding quantity before summing.
- Mixing up the totals of costs and quantities, leading to incorrect average calculations.
- Not clearly identifying all units and their respective costs and quantities.
