How to Calculate Inventory Value

by Rick Paulas; Updated September 26, 2017
Calculating inventory value is not difficult.

"Inventory value" is a definition in business that accounts for the value a business has for inventory that it has yet to sell. Inventory value is generally calculated at the end of a company accounting period (for example, at the end of a quarter evaluation) in order to accurately represent the value of the company, since unsold inventory has a value that must be accounted for. In the business world, there are two methods to determine inventory value--the average cost method and the batch method. While the average cost method is easier to calculate, the batch method provides a more accurate value.

Average Cost Method

Step 1

Find your average unit cost, which is the amount that every unit in your inventory costs for consumers to purchase.

Step 2

Find the number of units in your inventory. This is the number of units that you have not sold.

Step 3

Multiply the average cost per unit by the number of units in your inventory. For example, if the average cost per unit is $3, and the number of units in your inventory is 15, that means you have an inventory value of $45.

Batch Method

Step 1

Find the unit cost of batch one. For our example, a batch of cereal costs $4 per unit. Find the quantity of each batch. For our example, batch one of cereal has 100 units.

Step 2

Multiply the unit cost by the quantity of each batch in the inventory to find that batch's inventory value. In our example, that is $4 times 100, which equals $400 of inventory value.

Step 3

Repeat Steps 1 and 2 for each successive batch. In our example, let's say there are a total of two batches. In batch two, there is cereal with a unit cost of $3 and a quantity of 75. $3 times 75 equals $225, which is the inventory value of batch two.

Step 4

Add up all of the inventory values for each batch. In our example, that means adding $400 from batch one and $225 from batch two, which means the total inventory value is $625.

About the Author

Rick Paulas is a freelance writer based out of Los Angeles. He has been writing professionally since 2005. He has previously written for "McSweeney's,", "Vice Magazine" and "Radar Magazine," and has worked as an editor for "The Coming," "Duct Tape & Rouge," and "TSB Magazine." Paulas holds a Bachelor of Arts in telecommunications and advertising from Michigan State University.

Photo Credits

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