LIFO Calculator for Inventory

Then the inventory value InvVal\text{InvVal}InvVal formula reads:

InvVal=p1q1+p2q2+…+piqi\text{InvVal} = p_1 q_1 + p_2 q_2 + \ldots + p_i q_iInvVal=p1​q1​+p2​q2​+…+pi​qi​

Here, we are assuming the company has not sold any product yet. Please note how increasing/decreasing inventory prices through time can affect the inventory value.

The LIFO method assumes that it will take the last acquired items when the company sells its inventory. Assuming the company sells nnn products:

qiq_iqi​ = Number of units purchased the last time.

qi−1q_{i-1}qi−1​ = Number of units purchased one time before the last one.

qi−2q_{i-2}qi−2​ = Number of units purchased two times before the last one.

...and so on, until the number of sold items is equal to n. Assuming,

n=qi+qi−1+qi−2n = q_i + q_{i-1} + q_{i-2}n=qi​+qi−1​+qi−2​ ,

COGS would be:

COGS=qipi+qi−1pi−1+qi−2pi−2\text{COGS} = q_i p_i + q_{i-1} p_{i-1} + q_{i-2} p_{i-2} COGS=qi​pi​+qi−1​pi−1​+qi−2​pi−2​

Following our example above:

COGS=3×13+7×15=144\text{COGS} = 3 \times 13+ 7 \times 15 = 144 COGS=3×13+7×15=144

Notice how the cost of goods sold could increase if the last prices of the items the company bought also increase. What happens during inflationary times, and by rising COGS, it would reduce not only the operating profits but also the tax payment. Visit the inflation calculator to learn more.