# Help with AVCO - please

Registered Posts: 128 ? ? ?
Hi there I am new to the forums so apologies if anyone has posted this before.
My tutor (Bless his soul ha ha) has decided on a session of "square learning" where apparently we teach each other to try to get things to sink in. I've been given AVCO and am struggling to find enough out about it to be able to teach it to anyone - help please:001_wub:

• Registered Posts: 465
Hi

AVCO= Average Cost

It's quite a straight forward way of valuing stock:

you have 10,000 kgs of sand which you bought at £1 per kg = £10,000

Then you buy 5,000 kgs of sand at £1.10 per kg. = £5,500

You now have 15,000 kg of sand in one big pile which you bought for a total of £15,500

How do you value it?

Try this 15,500/15,000 = £1.03333per kg

Good luck!
• Registered Posts: 172 ? ? ?
consider that your stock situation consist of 3 types...

1) inventory (storing stock)
2) incoming
3) outgoing/issuing

this is how it works...

your current inventory has so many units at a total given value. you can easily calculate the £/unit.

you purchase new stock (incoming). add the value of the incoming stock to the value of inventory to arrive at a new total value of inventory. add the quantity of the incoming stock to the quantity of the inventory to arrive at a new total value of inventory. divide that new total value by the new total units of inventory to arrive at a new £/unit.

when you issue stock, you'll reduce inventory by the value and quantity of the issue at the rate of the last calculated £/unit.

your current inventory balance should always be the most up-to-date figure. in other words, after any incoming or issuing, you always recalculate the total inventory value and total number of units.
• Registered Posts: 2,415
...has decided on a session of "square learning" where apparently we teach each other to try to get things to sink in...

I've never heard it called that before but that kind of learning was invaluable to me when I was doing Intermediate and Technician. If you and the person next to you were to pick up 50% each of what the tutor was teaching then when conferring, I often found that you'd often end up filling in the gaps.

Different people tend to focus on different things and exploiting each others separate understandings while sharing common problems was a great way of overcoming difficult topics.
• Registered Posts: 5 Regular contributor ⭐ ? ⭐
Hi
You've probably already got enough info, but here's a quick link to a useful website for all things Finance:

http://www.investopedia.com/articles/02/060502.asp