How to calculate average inventory in inventory turnover formula?
I'm trying to find total inventory turnover (COGS/average inventory). The only problem is how do I calculate average inventory?
Given: Ending inventory: 18660, Sales: 1784080, COGS: 1428730
Inventory turnover ratio = ( Cost of Good Sold/Average Inventory)
Average Inventory - (Op Stock+Cl Stock)/2
Since you have given only Ending Inventory, it is assumed that Op Inventory was 0
So Your Inventory Turnover Ratio = 1428730/18660
= 73.5 Which is very good
You maintain a stock of 5 days which is good as per JIT and your concern has good Lean Mangement practices.
Source(s):6 months ago
Most turnover problems in textbooks just use ending inventory (or ending accounts receivable), if only for simplicity.by Don G - 6 months ago