The calculation of the Average Weighted Price can be explained by using this calculation for an example item:

  1. The current Average Weighted Post (AWP ) is $5.00 and there are 10 units in stock.
  2. A further 10 units are purchased for $5.50.

To calculate the AWP:

  1. The total cost of the original stock on hand, 10 units at $5.00 each = $50.00
  2. Add the additional 10 units purchased at $5.50 each = $55.00
  3. Divide the total cost of all units ($105.00) by the total number of units (20) = AWP ( $5.25)

If there is no Stock on hand, the new AWP will be cost of the next transaction in (purchase).