We recommend you use your average inventory value for the time period instead of the year’s ending inventory.Ĭalculate average inventory by adding the beginning and ending inventory costs for the year (or time period) and then dividing the cost total by two. Many businesses have stock levels that fluctuate by season rather than being consistent across every month. Now that you know the COGS formula, you will need to calculate your average inventory. At the end of the fiscal year, you have $120,000 worth of inventory.During the year, you purchased $175,000 worth of additional inventory.
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