LIFO Inventory Calculator
Calculate inventory valuation using Last In, First Out method
Inventory Purchases
Number of units sold from inventory
Price per unit for profit calculations
LIFO Calculation Results
Example: T-Shirt Inventory
Inventory Purchases
Purchase 1: 2 units at $10 each = $20
Purchase 2: 5 units at $13 each = $65
Purchase 3: 7 units at $15 each = $105
Total Inventory: 14 units worth $190
LIFO Calculation (10 units sold)
Start with most recent purchases:
• 7 units at $15 = $105
• 3 units at $13 = $39
COGS = $105 + $39 = $144
Ending Inventory: 2 units at $10 + 2 units at $13 = $46
LIFO Key Concepts
Last In, First Out
Most recent purchases are sold first
Higher COGS
In inflation, COGS is typically higher
Tax Benefits
Lower profits mean lower taxes
Lower Inventory
Older, cheaper items remain in inventory
LIFO vs FIFO
LIFO (Last In, First Out)
- • Higher COGS in inflation
- • Lower ending inventory
- • Tax advantages in US
- • Better matching of costs
FIFO (First In, First Out)
- • Lower COGS in inflation
- • Higher ending inventory
- • Required internationally
- • Better balance sheet
Understanding LIFO Inventory Method
What is LIFO?
LIFO (Last In, First Out) is an inventory valuation method where the most recently purchased items are assumed to be sold first. This means that the cost of goods sold reflects the prices of the newest inventory, while ending inventory contains the oldest, typically cheaper items.
How LIFO Works
- 1.Record all inventory purchases with quantities and prices
- 2.When items are sold, use prices from most recent purchases
- 3.Continue with earlier purchases if more units are sold
- 4.Remaining inventory consists of oldest purchases
LIFO Formula
COGS = Σ(Quantities Sold × Latest Purchase Prices)
Ending Inventory = Σ(Remaining Quantities × Earliest Purchase Prices)
Advantages of LIFO
- •Better matches current costs with current revenues
- •Reduces taxable income during inflation
- •More conservative profit reporting
- •Helps manage cash flow during price increases
Note: LIFO is only permitted in the United States under GAAP. International Financial Reporting Standards (IFRS) prohibit LIFO.