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Average Cost Flow Assumption. A calculation used by companies to monitor inventory goods. The average cost flow assumption is one of a variety of cost flow assumption methods used to determine the cost of goods sold (COGS) and ending inventory. Companies use one or more methods to make certain assumptions regarding which goods have been sold and which remain in inventory.
The average cost method assigns inventory costs by calculating a moving average of all inventory purchase costs. This method can be ideal for companies that sell non-perishable inventory in a non-sequential manner, such as video game retailers.nventory can take a variety of forms. logging equipment 3 image by Jim Parkin from Fotolia.com. Small business accountants can use one of four distinct inventory costing methods to account for the cost of goods sold.