The LIFO method is the exact opposite of the FIFO method. It also allows companies to sell older items first to make space for newer goods in their inventory later. Since prices tend to increase over time, companies that use the FIFO method sell their least expensive product first. This means that the first item purchased is the first item sold. ![]() In the FIFO method, the Ending Inventory is calculated by the order in which the items are listed in the inventory. An inventory turnover of less than 2 could mean weak sales due to poor team performance or a decline in the popularity of the products.Ĥ Methods to Calculate the Ending InventoryĮnding Inventory can be calculated in three different methods: ![]() Usually, high inventory turnover is proof of more sales and moderately good inventory.įor most industries, the ideal inventory turnover ratio is between 5 and 10, with a sweet spot of between 2 and 4. Using the same example above, the Inventory Turnover calculation will appear as follows: InvTurn = COGS / ((startInv + endInv) / 2) The Ending Inventory Calculator calculates Inventory Turnover with the following formula: With this figure, you'll be able to make more informed decisions when it comes to product manufacturing, marketing, pricing, and purchasing. To maximize efficiency, the Ending Inventory Calculator automatically calculates your inventory turnover to help you determine how well your company generates sales from its stock in a month, a quarter, or (most commonly) a year. ![]() Subtract this figure from the cost of producing the goods you sold during that accounting period. In contrast, Net Purchases refer to the value of the items that were purchased before the end of the accounting period.Ĭost of Goods Sold is the direct cost incurred in the production of goods sold by your company.įor example, let's assume that your company has a starting inventory of $30,000 and a net purchase value of $40,000. Starting Inventory refers to the value of your company's inventory at the beginning of the accounting period. The calculator uses the following formula:Įnd Inventory = (Starting Inventory + Net Purchases) − Cost of Goods Sold This brings us to the second method: using an ending inventory calculator. Furthermore, it opens a lot of room for human error since you'll have to manually count the remaining products in your inventory. When calculating your ending inventory, you can do either a physical or an analytical count.Ĭonducting a physical count is the most straightforward method of calculating your ending inventory, but it's also the most time-consuming. ![]() This calculator automatically calculates a company's Ending Inventory through its starting inventory, net purchases, and costs of goods sold. Luckily, Ending Inventory Calculator exists. It considers the initial inventory at the start of the accounting period, the purchases during the period, and the items sold.Ĭalculating Ending Inventory helps businesses maintain consistent inventory reports and get a better picture of their current assets, gross profit, and average spending at the end of the year.įor businesses that deal with dozens of products simultaneously, manually calculating Ending inventory is time and labor-consuming. Ending Inventory, also known as Closing Inventory, is a company's total value of sellable goods at the end of its accounting period.
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