To find average inventory, you simply need to add your beginning inventory and ending inventory and divide the sum by two. Once you’ve found COGS, you can calculate your average inventory. Assuming you purchased 77 bottles over the course of the month, your COGS calculation would look like this: You have 90 bottles at the beginning of September, making your beginning inventory $9,000, and 92 bottles at the end of September, making your ending inventory $9,200. You’ll take the beginning inventory, add purchases made over the course of the month, and then subtract ending inventory to find COGS.įor example, say you’re a retailer selling perfume for $100 per bottle. To find COGS, you’ll need to know the stock count of inventory at the beginning of the month (beginning inventory) and at the end of the month (ending inventory). To find the inventory turnover ratio, you first need to calculate the cost of goods sold (COGS). Here’s how the process breaks down with an example: 1. However, there are a few values you need to find before you can calculate inventory turnover itself. Inventory turnover = Cost of goods sold / Average inventory There are multiple formulas to calculate inventory turnover ratio, but the most commonly used formula is: Inventory turnover ratio formula + example While a higher turnover ratio typically represents stronger sales, companies can often struggle to meet surging demand, which, in some cases, can result in a stockout.
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