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But at the end, the total cost of purchases and production are added to beginning inventory cost to give cost of goods available for sale. Alternatively the costs of goods available for sales can be computed from the costs of sales: Costs of goods available for sale − Ending Inventory − Inventory write-downs = Cost of goods sold
Ending inventory is the amount of inventory a company has in stock at the end of its fiscal year. It is closely related with ending inventory cost, which is the amount of money spent to get these goods in stock. It should be calculated at the lower of cost or market.
In the FIFO example above, the company (Foo Co.), using LIFO accounting, would expense the cost associated with the first 75 units at $59, 125 more units at $55, and the remaining 10 units at $50. Under LIFO, the total cost of sales for November would be $11,800. The ending inventory would be calculated the following way:
Retail inventory method. Resellers of goods may use this method to simplify record keeping. The calculated cost of goods on hand at the end of a period is the ratio of cost of goods acquired to the retail value of the goods times the retail value of goods on hand. Cost of goods acquired includes beginning inventory as previously valued plus ...
Moving-average (unit) cost is a method of calculating ending inventory cost. Assume that both beginning inventory and beginning inventory cost are known. From them the cost per unit of beginning inventory can be calculated. During the year, multiple purchases are made. Each time, purchase costs are added to beginning inventory cost to get cost ...
Manufacturing management is more interested in inventory turnover ratio or average days to sell inventory since it tells them something about relative inventory levels. Inventory turnover ratio (also known as inventory turns) = cost of goods sold / Average Inventory = Cost of Goods Sold / ((Beginning Inventory + Ending Inventory) / 2) and its ...
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Two very popular methods are 1)- retail inventory method, and 2)- gross profit (or gross margin) method. The retail inventory method uses a cost to retail price ratio. The physical inventory is valued at retail, and it is multiplied by the cost ratio (or percentage) to determine the estimated cost of the ending inventory.