average-cost method

1. A method of determining the value of an inventory by calculating unit cost; that is, the result obtained by dividing the total cost of goods available for sale by the number of units available for sale. See also inventory valuation.
2. A method of valuing the cost basis of securities that are sold in order to determine the gain or loss for tax purposes. Average cost is calculated as total cost of shares owned divided by the number of shares owned. The average-cost method is particularly useful for shares acquired at varying prices in a reinvestment plan.