How to Calculate Inventory Purchases

Use the cost of goods sold to calculate inventory purchases.

Inventory is the lifeblood of many businesses. This is because the cost of inventory can dramatically influence the bottom line: profit. As such, it is important to be able to calculate the cost of inventory purchases. This is also important in order to find other calculations such as the cost of goods sold, ending inventory and the amount of inventory you originally started with.

Things You'll Need

• Calculator or spreadsheet

Instructions

1. Determine the cost of goods sold (COGS). COGS is the sum of all material and inventory costs used in the production of goods that are ready for sale. In this example, the COGS for the past month are $10,000.

2. Determine the amount of inventory at the beginning of the month. This is simply the value of inventory at the beginning of the period. Let's say the value of beginning inventory is $12,000.

3. Determine the value of inventory at the end of the period. Let's say the value of inventory at the end of the month is $15,000.

4. Calculate the difference between ending and beginning inventory. Subtract the value of inventory at the beginning of the month from the value of inventory at the end of the month. The caluclation is: $15,000 - $12,000 = $3,000.

5. Calculate the value of inventory purchases. Add COGS to the difference between beginning and ending inventory. The calculation is: $3,000 + $10,000 = $13,000.

References

• BNET: Calculating the Cost of Goods Sold