how do you use inventories taken at the beginning and at the end of the year to calculate whether or not you…

how do you use inventories taken at the beginning and at the end of the year to calculate whether or not you are making a profit?\nsubtract the older inventory from the newer inventory\ndivide the newer inventory by the older inventory\nmultiply the older inventory by the newer inventory\nadd the older and newer inventories together and divide by two

how do you use inventories taken at the beginning and at the end of the year to calculate whether or not you are making a profit?\nsubtract the older inventory from the newer inventory\ndivide the newer inventory by the older inventory\nmultiply the older inventory by the newer inventory\nadd the older and newer inventories together and divide by two

Answer

Answer:

None of the above options are correct for directly calculating profit from beginning - and end - of - year inventories. To calculate profit, one typically uses the formula: Profit = Revenue - Cost of Goods Sold (COGS). COGS can be calculated using the formula: COGS = Beginning Inventory + Purchases - Ending Inventory. But just subtracting, dividing, multiplying, or averaging beginning and ending inventories alone does not give profit.

Explanation:

Step1: Understand profit formula

Profit = Revenue - COGS

Step2: Understand COGS formula

COGS = Beginning Inventory + Purchases - Ending Inventory

Step3: Analyze given options

None relate to profit calculation.