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What is Finished Goods Inventory and How to Calculate it with QuickBooks Finished Goods Calculator

Most manufacturing operations involve transforming raw materials into finished goods. During this process, inventory goes through multiple stages of manufacturing. Categorising inventory by its various stages helps manage the production process and supply chain, and gives an accurate account of total inventory.

Knowing how to calculate your finished goods inventory is critical for deriving accurate accounting and inventory levels. In this article you will learn how to calculate finished goods inventory to ensure efficient inventory management.

What is Finished Goods Inventory?

Finished goods are the final products that have completed the manufacturing or production process and are ready to be sold to customers. These goods have undergone all the necessary stages of production, including processing, assembly, and packaging, and are in their final form, ready for consumption.

Finished goods can vary across industries, including electronics, clothing, furniture, automobiles, household appliances, food products, etc. Businesses transform raw materials or components into a finished product through various stages of value addition. Finished goods are the end result of this manufacturing or production process.

As most businesses only carry this type of inventory, the definition of finished goods may vary between manufacturers, retailers, and distributors.

For example, a manufacturing company that produces bottles will see it as a finished product and categorise it as a finished good. Its retailer customers, however, may be using the bottle to package their products and consider it packaging materials inventory.

Finished Goods Calculator

As a business, it’s essential to calculate your finished goods to keep track of the quantity and value of your inventory. It’s crucial for managing your stock levels and ensuring that enough of your finished products are available to meet demand.

Cost of goods manufactured

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Cost of goods sold

Previous finished goods inventory value

Start by adding your data above

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How to Calculate Finished Goods

Finished goods accounting doesn’t have to be complicated. Here’s everything you need to know about finished goods inventory and how to calculate it.

Finished Goods Inventory Formula

Here is the total finished goods inventory formula:

Finished Goods Inventory = Beginning Finished Goods Inventory + Cost of Goods Manufactured (COGM) - Cost of Goods Sold (COGS)

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How Quickbooks Can Help

Keeping track of your finished goods is essential for effectively tracking your inventory. QuickBooks inventory management software can help you create inventory items for your finished goods, set their quantities, and track movements. Automatically track the addition or sale of finished goods with our powerful accounting software to help maintain an accurate inventory count and value.

Our Inventory Management Software also automatically calculates COGS based on your inventory transactions. It tracks the cost of your finished goods sold by matching the inventory item's cost with the sales transaction, helping you stay on top of your finished goods calculations.

Sign up for a 30-day free trial today, or check our pricing to learn more about how QuickBooks can help you effectively manage your inventory.

Frequently Asked Questions

Why is calculating the value of finished goods important?

Can I automate the calculation of the finished goods using software or inventory management systems?

Yes, many inventory management systems and software solutions offer built-in features or integrations that automate the calculation of finished goods values. These systems can track inventory levels, costs, and quantities, and provide real-time calculations and reports. For instance, Quickbooks Inventory Management Software allows you to automatically calculate your COGS from your inventory transactions.

Are there any limitations when using a finished goods calculator?

When using a finished goods calculator, you need to ensure you add accurate and up-to-date inputs, including the correct quantity and cost per unit for each finished product.

Also, our calculator doesn’t account for other factors like discounts, overhead costs, or variances in inventory valuation methods, so it's important to understand the limitations and adjust calculations accordingly if necessary.

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