Average Inventory Cost
Average inventory Cost is used to estimate the cost of inventory that a business typically has on hand over a longer time period than just the last month.
Average inventory cost is a calculation comparing the cost or purchase price of a particular good or set of goods during two or more specified time periods. Average inventory is the mean value of an inventory throughout a certain time period, which may vary from the median value of the same data set.
(Current Inventory + Previous Inventory) / 2
Previous inventory levels are $9000, $8500 and $12000.
Also current inventory is $10000
Average inventory will be (9000 + 8500 + 12000 + 10000) / 4 = $9875