Calculate inventory value using FIFO, LIFO, and weighted average cost methods with COGS comparison and tax impact.
Inventory purchases made at different unit costs can produce different reported results even when the same number of units is sold. This tool applies FIFO, LIFO, and weighted average cost to one set of inventory transactions, then compares cost of goods sold, ending inventory, and the estimated tax effect. Users are often surprised that these are cost-flow assumptions, not records of which physical items left storage. Transaction order matters, particularly when unit costs change.
A concrete input and expected output from the current implementation.
Input
Purchase 10 units at $5 each Purchase 10 units at $7 each Sell 12 units Tax rate: 25%
Expected output
FIFO: COGS $64, ending inventory $56 LIFO: COGS $80, ending inventory $40 Weighted average: average cost $6 per unit, COGS $72, ending inventory $48 Tax difference relative to FIFO: weighted average $2 lower; LIFO $4 lower
The 20 available units cost $120. FIFO assigns $50 + $14 to COGS, LIFO assigns $70 + $10, and weighted average assigns 12 x $6; each method's COGS plus ending inventory equals $120. The COGS increases over FIFO are $8 and $16, producing estimated tax differences of $2 and $4 at 25%.
FIFO assigns the oldest purchase costs to units sold, leaving newer costs in ending inventory. LIFO assigns the newest costs to units sold, leaving older costs in inventory. Weighted average pools available cost across available units and applies the resulting per-unit cost to both sold and remaining quantities. The comparison changes cost assignment, not the number of units.
For every method, the cost of goods available should equal COGS plus ending inventory. The tax comparison converts differences in COGS into an estimated difference using the entered tax rate, with other income and expenses held constant. It illustrates the direction and size of a valuation-method effect; it does not determine actual tax liability or method eligibility.
No. The comparison shows arithmetic outcomes, not whether a method is permitted for a particular entity or return. Applicable accounting standards, tax law, existing elections, and consistency requirements control that decision. For example, IAS 2 permits FIFO and weighted-average cost formulas for ordinarily interchangeable inventory but does not permit LIFO.
If every available unit has the same cost, changing the assumed order cannot change COGS or ending inventory. Results can also coincide by chance when different cost layers average to the same assigned amount. Differences normally appear when unit costs vary and some, but not all, available units are sold.
The example and behavioral notes were checked against the browser implementation. Standards and primary references below define the relevant format, formula, or platform behavior.
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