FIFO and LIFO Inventory Planning Guide
Inventory valuation affects profit, tax planning, and buying decisions. This calculator helps you compare two common inventory flow assumptions. FIFO means first in, first out. It sells the oldest cost layers first. LIFO means last in, first out. It sells the newest cost layers first.
These methods can create different cost of goods sold figures. When purchase costs rise, FIFO often leaves higher ending inventory. It also may show higher gross profit. LIFO often assigns recent higher costs to sales. That can lower reported gross profit. When costs fall, the relationship can reverse.
The calculator accepts beginning stock and up to six purchase layers. Each layer has a quantity and unit cost. You can enter sold units, sale price, discounts, tax rate, freight, and other fees. The tool then builds a layer schedule. It consumes quantities using FIFO and LIFO rules. It reports cost of goods sold, ending inventory, net sales, expenses, profit, and margin.
Use consistent units for every entry. Do not mix boxes, pieces, and cases unless you convert them first. Enter only available units as sold units. If sold units exceed stock on hand, the calculator warns you. It still calculates using the available quantity.
FIFO is useful when physical goods normally move by age. Food, medicine, and dated stock often match this pattern. LIFO can help managers understand recent replacement cost pressure. Some accounting rules may restrict LIFO use. Always check local reporting rules before filing official statements.
The results are planning estimates. They are not a replacement for accounting records. Use the export buttons to save a CSV or simple PDF summary. Keep the example table nearby when testing the layout. It shows how rising purchase prices can change the final comparison.
A good inventory review should include more than one number. Compare both methods. Check stock age. Study supplier price trends. Watch margins after freight and fees. This broader view makes pricing decisions clearer. It also helps buyers plan reorder timing with stronger confidence. Reliable inputs produce better reports. Review every cost layer before sharing results with your team. Document assumptions clearly. Save each export with the purchase date. Recheck totals after returns, damaged units, or supplier rebates change actual inventory cost records soon.