How do you calculate estimated cost of ending inventory?
James Olson
Updated on February 24, 2026
The basic formula for calculating ending inventory is: Beginning inventory + net purchases – COGS = ending inventory. Your beginning inventory is the last period’s ending inventory. The net purchases are the items you’ve bought and added to your inventory count.
How do you forecast ending inventory?
The basic steps are:
- Add together the cost of beginning inventory and the cost of purchases during the period to arrive at the cost of goods available for sale.
- Multiply (1 – expected gross profit %) by sales during the period to arrive at the estimated cost of goods sold.
How do you calculate cost of goods sold and ending inventory using FIFO?
To calculate FIFO (First-In, First Out) determine the cost of your oldest inventory and multiply that cost by the amount of inventory sold, whereas to calculate LIFO (Last-in, First-Out) determine the cost of your most recent inventory and multiply it by the amount of inventory sold.
How do you calculate inventory value?
Inventory values can be calculated by multiplying the number of items on hand with the unit price of the items.
How to calculate the cost of ending inventory?
Retail Inventory Method Calculation. To calculate the cost of ending inventory using the retail inventory method, follow these steps: Calculate the cost-to-retail percentage, for which the formula is (Cost ÷ Retail price). Calculate the cost of goods available for sale, for which the formula is (Cost of beginning inventory + Cost of purchases).
How is the retail method used in estimating inventory?
A very simple illustration of using the retail method for estimating the cost of ending inventory (using hypothetical amounts unrelated to earlier examples) is shown here: Notice that the cost amounts are presented in one column and the retail amounts are listed in a separate column.
How to calculate the ending inventory in FreshBooks?
Add the cost of beginning inventory to the cost of purchases during the period. This is the cost of goods available for sale. Multiply the gross profit percentage by sales to find the estimated cost of goods sold. Subtract the cost of goods available for sold from the cost of goods sold to get the ending inventory.
How to estimate the ending cost of goods sold?
How to estimate ending inventory. Multiply (1 – expected gross profit %) by sales during the period to arrive at the estimated cost of goods sold. Subtract the estimated cost of goods sold (step #2) from the cost of goods available for sale (step #1) to arrive at the ending inventory.
