What is annual merchandise cost?

The annual cost of merchandise for a retail business is calculated by adding the beginning merchandise inventory at cost to purchases at cost for a specific accounting period, then subtracting the ending merchandise inventory at cost at the end of the same accounting period.

In other words:

Beginning Inventory + Merchandise Purchases - Ending Inventory = Cost Of Goods Sold (COGS)

Annual merchandise cost is commonly referred to as the annual cost of goods sold.