Question

Inventory can be calculated by dividing the total number of customers that arrived during a period of time by the length of that period of time. True or false

Answer 1

The statement, inventory can be calculated by dividing the total number of customers that arrived during a period of time by the length of that period of time, is false.

Inventory cannot be calculated by dividing the total number of customers which arrived during a period of time by the length of that period of time because that is how you calculate average flow rate.

First in calculating inventory, you will need to know the inventory levels on the first day of the accounting period. Then the inventory values must be multiplied by the number of items on hand with the unit price of the items.

Hence, one determines the total costs of goods available in that period to calculate inventory.

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