The final step in In contrast to the firstin firstout method and the lastin firstout method the weight average cost method assigns the same value to each item purchas. You can use this method to balance LIFO and FIFO methods because it gives an average of all costs. To find out more about the differences between FIFO LIFO and Avarage you can read in more detail via this link . If it is not ideal for a business to perform a physical inventory.
Count at the end of each The final step in
Accounting period then it may Cambodia WhatsApp Number List choose a valuation method that uses estimates such as Gross profit method Uses the expect gross profit percentage of total sales to find the cost of goods sold. Retail method Uses the costtoretail percentage of total sales to find the cost of goods sold. Work in process method Includes the value of some goods produc as assets when calculating ending inventory. We will discuss these three methods in depth below How to Calculate Ending Inventory Using the Gross Profit Method The following are the steps for using the gross profit method in calculating ending inventory.
Find the cost of goods available
You can do this by adding your initia l inventory New Zealand Phone Number List cost to the cost of all purchases. The result is the cost of goods available for sale. The formula for the cost of goods available is Cost of goods on hand Cost of initial inventory Cost of all purchases Also read Knowing what longterm and shortterm debt is in business . Find the cost of goods sold Next multiply the total sales amount by the gross profit percentage to determine the cost of goods sold. Cost of goods sold formula Cost of goods sold Sales x Gross profit percentage . Find ending inventory profit method is to subtract the cost of goods sold from the cost of goods available.