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Weighted Average Method
This way is a perpetual weighted average system whereas the issue price is recalculated after one of receipt of stocks taking into accounts both money and quantities vale of the stocks received.
During this case stock employed or unused is based upon the average price per unit whereas the average price per unit is calculated as specifies as:
= Net value of stocks/No. of units of stock
= Average Price per Unit
= (Money value of old stocks + Money Value of New Stocks)/(Quantity of old stocks + Quantity of New Stocks)
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