To calculate a company's total amount of merchandise purchased for a month, you need to know three different elements: the company's beginning inventory at the start of the month in question, the company's ending inventory at the end of the month in question and the company's cost of goods sold. These amounts should be listed on the company's balance sheet and income statement for the period. This calculation can help the company determine its production costs and how much merchandise it will need to sell to stay ahead of these costs.

Look at the company's balance sheet for the month in question to find the inventory at the beginning of the month. For example, assume that Company C had a beginning inventory of \$9,000 for the month.

Look at the company's balance sheet for the month in question to find the inventory at the end of the month in question. Continuing with the same example, assume that Company C had an ending inventory or \$11,000 for the month in question.

Look at the company's income statement for the period to find the company's cost of goods sold. The cost of goods sold is the sum of the total value of the merchandise purchased during the month and any expenses incurred that are necessary to make the merchandise available for sale. These additional expenses will vary from company to company, but they typically include expenses such as shipping costs, packaging costs and the labor cost of employees who perform services directly related to getting the merchandise ready to be sold. Continuing with the same example, assume that Company C's cost of goods sold is \$113,000.

Add the company's cost of goods sold to its ending inventory and then subtract the company's beginning inventory. The resulting value is the total amount of the company's merchandise purchase for the month. Continuing with the same example, Company C's total amount of merchandise purchased for the month is \$115,000. This means that Company C purchased \$115,000 worth or merchandise during the month in question.

Things You Will Need
• Balance sheet

• Income statement

• Calculator (optional)

Tip

It is useful to know the total amount of merchandise your company purchases during each month since the amount shows how busy your company is and how much merchandise it moves.

If your company is moving merchandise slowly, it is typically prudent to cut down on the amount of merchandise you purchase in subsequent months.