How to Calculate Average Selling Prices

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Financial statements provide lots of useful information, but they don't typically list the average selling price of company products. If you want to determine the average selling price of all the products a company sold, determine net revenue for the period and divide it by the amount of inventory sold.

Find Net Sales Revenue

  1. Find product sales revenue for the period. Sales revenue is the first line item listed on the income statement, directly below the revenue heading.
  2. Determine any sales discounts or product returns for the period. If these exist, they will be listed directly underneath sales revenue. 
  3. Subtract discounts and returns from sales revenue to calculate net sales. For example, if sales revenue was $500,000, returns were $2,000 and discounts were $1,000, net sales is $497,000.

Determine Inventory Sold

  1. From the company's inventory management system, obtain a schedule of inventory activity for the same accounting period.
  2. To calculate number of units sold during the period, add units purchased during the period to beginning inventory and subtract ending units. For example, suppose a company had 500 units of inventory at the beginning of the period. It bought another 100 during the period and closed the period with 200 units. You would add 500 to 100 to get 600, then subtract 200 to arrive at 400 units of product sold during the period.

Calculate Average Selling Price

Divide net sales by the number of products sold during the period. For example, if net sales were $497,000 and 400 units were sold, the average selling price for all products was $1,242.

Tip

  • This calculation determines the average selling price of all products that a company sells. You can also find the average selling price of a specific product by obtaining individual product revenue from a detailed income statement and specific product inventory activity in the inventory management system.

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