Average Inventory Calculation
The average inventory calculation is used to find the average value of a company’s inventory during a specific period. It is typically calculated by taking the sum of the inventory values at the beginning and end of the period and dividing by 2. This method helps in evaluating inventory levels over time and can be useful in various analyses, such as calculating inventory turnover or days in inventory.
The formula for average inventory is:
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Example of the Average Inventory Calculation
Let’s consider a small retail store that sells clothing items.