Glossary · Business management

CUMP: valuing inventory at weighted average cost

5 min read · Updated on 3 July 2026

Definition CUMP (Weighted Average Unit Cost, sometimes called PUMP or PMP) is an inventory valuation method: each stock withdrawal is valued at the average cost of all available units, recalculated by weighting quantities by their successive purchase prices. It is the most widely used method in France alongside FIFO—and one of only two fiscally approved methods for interchangeable goods.

The full entry

The essentials in brief

CUMP = stock value ÷ stock quantities, recalculated after each entry (or at period end).
It smooths purchase price fluctuations: the displayed margin doesn’t yo-yo with supplier rates.
Two variants: after each entry (the standard with software) or at monthly period end.
Only fiscally accepted methods in France for fungible goods: CUMP and FIFO – never LIFO.
Accurate CUMP requires full purchase costs: transport, customs, packaging included.

I The calculation

The calculation, with a real-world example

The formula after each entry:

 CUMP = (Value of existing stock + Value of new entry)
        ─────────────────────────────────────────────────
        (Quantity in stock + Quantity entered)

Example — a merchant tracks a cable reference:

Date	Movement	Qty	Unit price	Stock	CUMP
01/03	Opening stock	100	€10.00	100	€10.00
08/03	Purchase	50	€13.00	150	€11.00
15/03	Sale	−80	exit at €11.00	70	€11.00
22/03	Purchase	100	€12.20	170	€11.71

On 08/03: (100 × €10 + 50 × €13) / 150 = €1,650 / 150 = €11.00. The sale on 15/03 is therefore costed at €11.00—neither the old price (€10) nor the latest price (€13), but the actual average cost of what is in stock.

What this means for margin: with rising purchase prices, FIFO (first in, first out) exits older, cheaper units first → apparent margin looks better but stock is overvalued. CUMP smooths: the margin reflects the true average cost, without sudden jumps. This is why businesses with volatile prices (commodities, energy, components) almost all prefer CUMP.

⚠️ Entry cost must be complete: invoiced price + transport + customs + lost packaging. A CUMP calculated on the supplier’s catalogue price alone undervalues stock and artificially inflates margin—both the tax auditor and the statutory auditor will check this.

fiscally approved methods in France: CUMP and FIFO (LIFO is prohibited)

100 %

included in acquisition cost: transport and customs

1×/entry

standard recalculation frequency with inventory management software

II The choice

CUMP or FIFO: how to choose (and stick with it)

Criterion	CUMP	FIFO
Margin impact	Smoothed	Follows old prices (flattering in inflation)
Balance sheet stock value	Average	Close to latest prices (more "current")
Manual complexity	Recalculate after each entry	Lot tracking
Best suited for	Volatile prices, fungible products	Perishable goods, lot traceability

The rules of the game:

The method choice is free… but permanent: changing it constitutes an accounting method change, which must be justified and documented in the notes. You cannot switch from CUMP to FIFO just because the year’s margin would look better.
FIFO is naturally required when logistics itself is FIFO (use-by dates, expiry, lot traceability): it makes sense to align valuation with the actual physical flow.
In practice, the question disappears with inventory management software: CUMP is recalculated automatically after each receipt, each withdrawal is valued without intervention, and perpetual inventory replaces the end-of-month recalculation chore. The subject reverts to what it should be: a one-time parameter choice.

💡

Golden rule

CUMP does not eliminate the need for physical inventory: at least one full annual count (or rolling count) remains mandatory. Discrepancies between inventory and theoretical stock (breakage, shrinkage, reception errors) must be adjusted—recurring discrepancies > 2% indicate a faulty reception process.

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III Frequently asked questions

Answers to the questions we get asked most.

Are CUMP, PUMP and PMP the same thing?

Yes — three acronyms for the same method: Coût Unitaire Moyen Pondéré (the term from the French General Chart of Accounts), Prix Unitaire Moyen Pondéré, and Prix Moyen Pondéré. “CUMP” is the exact accounting term: it weights acquisition COSTS, not selling prices. If your software or accountant refers to PUMP or PMP, it is the same calculation.

Is end-of-period CUMP still acceptable?

Yes, the “end-of-period CUMP” variant (calculated once a month across all entries) remains valid, provided the reference period does not exceed the average storage duration. This was the method used for manual inventories; it yields slightly different results from CUMP after each entry (all monthly exits are valued at the same average cost). With perpetual inventory software, CUMP after each entry has become the standard—more precise and with no extra effort.

How to handle supplier and customer returns in CUMP?

Return TO supplier: stock exits at its current CUMP, and the supplier credit note settles any difference with the original purchase price. Return FROM customer: goods re-enter stock—ideally at their original exit cost (which recalculates the CUMP), or at the current CUMP for simplicity if return volumes are low. Key point: a customer return must never re-enter at the SELLING price—a common mistake that inflates stock and distorts margins.

The calculation, with a real-world example

CUMP or FIFO: how to choose (and stick with it)

What if a tool handled this for you?

Answers to the questions we get asked most.

Make Orizen better, one click is enough.