@Jeff Example from Help: - Monday, you buy 20 calculators at $10 each and put them in inventory. - Tuesday, you buy 20 calculators at $15 each and put them in inventory. - Wednesday, you sell 5 calculators to a customer. The recorded cost of the calculators is calculated based on the costing method as follows: AVERAGE The 5 calculators post a cost of $12.50 because that is the average cost of all calculators in inventory. This is calculated as [(20 x $10) + (20 x $15)] /40 = 12.5.