Given opening inventory $2,000 and closing inventory $1,500, what is the average inventory?

• A. 2,000
• B. 1,500
• C. 2,250
• D. 1,750

Answer: (D)

The main idea is to estimate the stock level over a period by averaging the opening and closing inventory. This midpoint gives a representative value to use in calculations like cost of goods sold and inventory turnover.

Calculate the average as (opening + closing) / 2. Here that’s (2,000 + 1,500) / 2 = 3,500 / 2 = 1,750. So the inventory averaged over the period is 1,750.

This works because it accounts for the change in stock during the period rather than just picking one end. Using only the opening stock ignores usage and purchases during the period, and using only the closing stock ignores what was on hand at the start. An alternative number that isn’t the midpoint wouldn’t accurately reflect the typical stock level across the period.