The inventory gross profit method is one way of estimating the cost of inventory at the end of an accounting period. This gross profit method calculator works out the historical gross profit percentage of a business, and then uses this to estimate the cost of the ending inventory for the current accounting period.
If you need further information on the use of gross profit methods and the calculations they involve, our gross profit methods in accounting tutorial discusses these in more detail.
Instructions
The Excel gross profit method calculator, available for download below, is used by entering details of the historical revenue and gross profit, and the current period beginning inventory, purchases and revenue. Using this information, the calculator works out the historical gross profit percentage, the goods available for sale, and estimates the current period cost of goods sold and ending inventory.
To use the calculator enter the details as follows:
Step 1
Enter the historical revenue and gross profit from the latest available financial statements. The calculator works out the historical gross profit percentage for the business.
Step 2
Enter the beginning inventory and the purchases made for the current accounting period. Both figures should be entered at cost. The gross profit method calculator calculates the goods available for sale during the accounting period.
Step 3
Enter the revenue for the current accounting period. Based on the historical gross profit percentage calculated in Step 1, the calculator now estimates the cost of goods sold for the period.
Step 4
Finally, the gross profit method calculator estimates the ending inventory for the accounting period by deducting the cost of goods sold from the goods available for sale.
Gross Profit Method Calculator Download
The GP method calculator spreadsheet is available for download in Excel format by following the link below.
The gross profit method calculator is one of many financial calculators available for bookkeeping and accounting, discover another at the links below.
Users use this gross margin method calculator at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of a GP method calculator that you might use when considering how to calculate ending inventory. It is purely illustrative. This is not intended to reflect general standards or targets for any particular business, company or sector. If you do spot a mistake in this GP% method calculator, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.