Opening inventory.. 5000
Purchases 2000
Closing inventory 6000
How is that we calculate average inventory is it 5000+6000÷2 ?
For ratio calculation purpose
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Average
9y ago#1Because we have two inventory valuations and we want the average
So add all the different values together and then divide by the number of valuations
There are only 2
If there had been another valuation half way through the year worth $8000, then average inventory would have been $5,000 + $6,000 + $8,000 = a total of $19,000 and an average of $6,333
OK?
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