The Average Cost Method of Inventory is a method used to calculate the cost of goods sold and inventory value on a company’s financial statements. It assigns an average cost to the goods available for sale, and uses this figure in the valuation and determination of costs and profits. This method is beneficial to companies that regularly buy in bulk or purchase items at varying prices. By assigning one average cost per item, it helps to smooth out any fluctuations in purchasing costs. With the Average Cost Method, businesses can accurately report their inventory values, profits and losses and comply with tax requirements—all essential elements for determining success!