Final answer:
Average inventory is a business metric calculated by averaging the inventory levels over a set time period, typically to analyze inventory trends or make stocking decisions. It is relevant to the study of index numbers, which track economic changes using statistical data.
Step-by-step explanation:
The average inventory is a calculation used in business and economics to understand the level of inventory a company has on hand over a period of time. The APICS (The Association for Supply Chain Management) defines average inventory as the average value or quantity of inventory in stock over two or more specified time periods (• such as month-by-month or quarter-by-quarter).
To calculate average inventory, you typically add the inventory levels from each period together and then divide by the number of periods. For example, if you have inventory values of $10,000 at the beginning of the month and $15,000 at the end of the month, the average inventory would be ($10,000 + $15,000) / 2, which equals $12,500.
The concept of average inventory is relevant when discussing index numbers, which are used to track changes in various economic indicators over time. Index numbers represent a statistical measure of change in a representative