Average Inventory

The average inventory is computed by taking the inventory on December 31 of one year, adding it to the inventory of December 31 of the next year diving by two.

If the inventory on December 31, 2017 was $10,000 and the final inventory count on December 31, 2018 was $20,000, the average inventory would be (10,000 + 20,000) /2 or $15,000.

https://accounting.uworld.com/cpa-review/lc/accounting-dictionary/term/average-inventory/