COST OF INVENTORY

If you are working with a period of one month, six months, or one year, it is important to understand what is the actual amount of inventory on stock at both the beginning and the end of the period.

(1) Beginning inventory

(2) Ending inventory

(3) Purchases

(4) Discounts, Duties, Transportation, Installation, Setup, Testing, etc., to get the inventory into a state ready for sale

Cost of Inventory = Beginning Inventory + Purchases - Ending Inventory

Minor adjustments may be made for inventory used for personal reasons of company owners or employees.