Inventory Average Cost Method is an accounting methodology used to count the cost of a company’s inventory. This method uses an average figure instead of calculating each item’s individual cost. It takes into account items that have been manufactured, purchased, or received as part of an exchange transaction. The average cost assigns a common value to all units in stock at any given time, based on the total cost of all the items divided by the total number of items held in inventory. The advantage of using this approach is that it prevents any significant deviation between actual costs and inventory valuation, providing a more accurate representation of a company’s bottom line.