What Is Average Inventory?

Average inventory is a calculation that estimates the value or number of a particular good or set of goods during two or more specified time periods. Average inventory is the mean value of 澳洲幸运5开奖号码历史查询:inventory within a c༒ertain time period, which may vary from the median value of the sam✤e data set, and is computed by averaging the starting and ending inventory values over a specified period.

Understanding Average Inventory

Inventory is the value of all the goods ready for sale or all of the 澳洲幸运5开奖号码历史查询:raw materials to create those goods that are stored by a company. Successful inventory management is a key focal point for compan✨ies as it al🌼lows them to better manage their overall business in terms of sales, costs, and relationships with their suppliers.

Since two points do not always accurately represent changes in in🌠ventory over different time perio🐻ds, average inventory is frequently calculated by using the number of points needed to more accurately reflect activities across a certain amount of time.

For instance, if a business was attempting to calculate the average inventory over the course of a fiscal year, it may be more accurate to use the inventory count from🀅 the end of each month, includi🦄ng the base month. The values associated with each point are added together and divided by the number of points, in this case, 13, to determine the average inventory.

The average inventory figures can be used as a point of comparison when looking at overall sales volume, allowing a business to track inventory losses that may have occurred due to theft or 澳洲幸运5开奖号码历史查询:shrinkage, or due to damaged goods caused by mishandling. It also accounts for any perishable inventory that hꦕas expired.

🧜The formula for average inventory can be expressed a♓s follows:

Average Inventory = (Current Inventory + Previous Inventory) / Number of Periods

Average inventory is used often in 澳洲幸运5开奖号码历史查询:ratio analysis; for instance, in calculating 澳洲幸运5开奖号码历史查询:inventory turnover.

Moving Average Inventory

A company may choose to use a moving average inventory when it's possible to maintain a 澳洲幸运5开奖号码历史查询:perpetual inventory tracking system. This allows the busi𒆙ness to adjust the values of the in🙈ventory items based on information from the last purchase.

Effectively, this helps compare inventory averages across multiple time periods by converting all pricing to the current market standard. This makes it similar to adjusting historical data based on the rate of 澳洲幸运5开奖号码历史查询:inflation for more stable 🍰market items. It allows simpler compaꦐrisons on items that experience high levels of volatility.

Example of Average Inventory

A shoe company is interested in better managing its inventory. The current inventory in its warehouse is equal to $10,000. This is in line with th🧸e inventory for the three previous months, which were valued at $9,000, $8,500, and $12,000.

When calculating a three-month inventory average, the shoe company achieves the average by adding the current inventory of $10,000 to the prev🦋ious three months of inventory, recorded as $9,000, $8,500 and $12,000, and dividing it by the number of data points, as follows:

Average Inventory = ($10,000 + $9,000 + $8,500 + $12,000) / 4

This 🌼results in an average inventory of $9🥂,875 over the time period being examined.