The Average Cost Method Ending Inventory is a business accounting principle used to calculate and determine the value of a company’s inventory. This method takes into account all the costs associated with acquiring and replenishing the inventory and then uses an average cost of all those purchases for determining the current inventory’s worth. This method eliminates any significant variations in the cost of individual items, helping companies get an accurate idea of their inventory and its worth. Ultimately, this ensures that a company’s reported ending inventory is both fair and reliable.