FIFO Inventory Calculator
Calculate inventory value using FIFO method where oldest inventory items are sold first
What is FIFO (First-In, First-Out)?
Calculate inventory value using FIFO method where oldest inventory items are sold first
Advantages of FIFO
Most common and widely accepted method
Better for inflationary periods
Higher reported profits during inflation
Reflects current market value of ending inventory
Matches physical flow of goods for most businesses
When to Use FIFO
Perishable goods and products with expiration dates
Inflationary business environments
When inventory follows natural flow patterns
International businesses (IFRS compliance)
Retail and consumer goods industries
Considerations for FIFO
Higher tax liability during inflation
May not match actual cost of goods sold
Can overstate profits in rising price environments
FIFO Formula
Under FIFO, the cost of ending inventory is based on the most recent purchases, as older inventory is assumed to be sold first.
FIFO Calculation Example
Scenario:
ABC Company purchases inventory in three batches during January:
Purchases:
| Date | Quantity | Unit Cost | Total Cost |
|---|---|---|---|
| Jan 5 | 100 | $10 | $1000 |
| Jan 15 | 200 | $12 | $2400 |
| Jan 25 | 150 | $14 | $2100 |
320 units sold during January
Calculation Steps:
Step 1: Total units available = 100 + 200 + 150 = 450 units
Step 2: Units remaining = 450 - 320 = 130 units
Step 3: Under FIFO, the 320 units sold come from oldest inventory first:
- All 100 units from Jan 5 purchase (cost: $10 each)
- All 200 units from Jan 15 purchase (cost: $12 each)
- 20 units from Jan 25 purchase (cost: $14 each)
Step 4: Ending inventory consists of remaining 130 units from newest purchase:
- 130 units × $14 = $1,820
Step 5: Cost of Goods Sold = (100 × $10) + (200 × $12) + (20 × $14) = $3,680
Final Results
Compare Inventory Valuation Methods
Understanding how FIFO compares to other methods can help you make informed decisions.
FIFO
CurrentFirst-In, First-Out
Top Advantages:
- Most common and widely accepted method
- Better for inflationary periods
- Higher reported profits during inflation
Best For:
- Perishable goods and products with expiration dates
- Inflationary business environments
LIFO
PremiumLast-In, First-Out
Top Advantages:
- Matches current costs with current revenue
- Lower reported profits during inflation (tax benefit)
- Reduces tax liability in rising cost environments
Best For:
- US-based businesses (not allowed under IFRS)
- Rising cost environments for tax benefits
Weighted Average
PremiumWeighted Average Cost Method
Top Advantages:
- Smooths out price fluctuations over time
- Simpler to calculate and understand
- Moderate profit reporting between FIFO and LIFO
Best For:
- Commodities and similar products
- When units are indistinguishable
Average Cost
PremiumAverage Cost Method
Top Advantages:
- Simple and straightforward calculation
- Eliminates price fluctuation effects
- Easy to understand and implement
Best For:
- Small businesses with simple inventory
- Limited transaction volume
Free FIFO Calculator
Start calculating your FIFO inventory value for free:
- Upload CSV data
- Instant calculations
- Export results
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