What is finished goods inventory?
Finished goods inventory is the stock a manufacturer has fully completed and is holding ready for sale. It is the last of the three manufacturing inventories, after raw materials and work in progress, and it appears as a current asset on the balance sheet.
Formula
Ending finished goods = beginning finished goods + cost of goods manufactured − cost of goods sold
Worked example
Starting with 20,000.00 of finished goods and completing another 150,000.00, you had 170,000.00 available for sale. After selling goods that cost 140,000.00, 30,000.00 remains.
How to use the finished goods inventory calculator
- Enter your figures: beginning finished goods inventory, cost of goods manufactured and cost of goods sold.
- Read the result. It updates as you type, so there is no button to press.
- Try other numbers to compare scenarios. Reset brings back the example values.
Getting it right
- Cost of goods manufactured is the cost of units completed in the period, not everything spent on the factory floor.
- A balance that keeps growing means production is running ahead of sales.
- Finished goods are valued at production cost, not at the price you will sell them for.
Frequently asked questions
How do you calculate finished goods inventory?
Add the cost of goods manufactured during the period to the beginning finished goods balance, then subtract cost of goods sold.
What is the difference between finished goods and work in progress?
Work in progress is still being made and needs more labour or materials. Finished goods have passed final inspection and are ready to ship.
Do retailers have finished goods inventory?
Retailers and wholesalers call the same thing merchandise inventory, because they buy goods already complete instead of making them.