What Is The Formula For Average Inventory?
The formula for average inventory is the sum of the opening inventory balance and the closing inventory balance, divided by two. Mathematically, it can be represented as (Opening Inventory + Closing Inventory) / This formula is used to calculate the average inventory balance of a company over a specific period, typically a month or a year. The average inventory is used to determine the cost of goods sold (COGS) and the company’s gross margin.