Sliding average price

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The moving average price (short GLD price ) is used for the inventory valuation of items that were purchased at different prices. He uses the moving average method to calculate an average price. It corresponds to the quantity-weighted cost price of the individual procurement processes , i.e. the average, historical cost price .

With

: new average price

: old average price

: previous stock quantity

: Cost price of the new goods

: Purchase quantity of the new goods

Since the stocks may originate from procurement processes that are far in the past, but also for computational reasons, a layered inventory management valued at the respective purchase price to determine the current average price would be unnecessarily complicated and out of place. In addition, the moving average price also solves the problem of how to evaluate temporary inventory disposals. The GLD price valid on the key date is used for this.

Naturally, the GLD price and the current market cost price generally do not match. It is higher (or lower) than the market price if in the past purchases were made at higher (lower) costs on average.

For accounting reasons , the GLD price may not be used for the inventory valuation in the balance sheet if the current purchase price is below the GLD price ( lowest value principle ). From a business point of view, the imputed GLD prices should be checked and revalued or devalued from time to time. Since accounting and performance-related requirements sometimes contradict each other, it may be useful and necessary to maintain two different views of the inventory valuation for the accounting and business / calculation needs .

The moving average price plays a role for inventory valuation in the following areas, among others: