📦 LIFO Calculator
Calculate Cost of Goods Sold using LIFO
Valued at older (lower) costs under LIFO
How to Use This Calculator
Enter Beginning Inventory
Input the beginning inventory value - the inventory value at the start of the period.
Enter Purchases
Enter the total cost of inventory purchased during the period.
Enter Ending Inventory
Enter the ending inventory value - under LIFO, ending inventory is valued at older (lower) costs, which typically results in higher COGS compared to FIFO.
Review COGS
See the cost of goods sold (COGS) calculated using the LIFO method - COGS = Beginning Inventory + Purchases - Ending Inventory.
Formula
COGS (LIFO) = Beginning Inventory + Purchases - Ending Inventory
Example Calculation:
If beginning inventory $50,000, purchases $100,000, ending inventory $60,000:
• COGS = $50,000 + $100,000 - $60,000 = $90,000
• Under LIFO, ending inventory is valued at older (lower) costs
• This typically results in higher COGS and lower ending inventory compared to FIFO
About LIFO Calculator
A LIFO (Last In, First Out) calculator helps you calculate the cost of goods sold (COGS) using the LIFO inventory valuation method. Under LIFO, the most recently purchased inventory is assumed to be sold first, so ending inventory is valued at older (typically lower) costs. LIFO typically results in higher COGS and lower ending inventory compared to FIFO, especially during periods of rising prices. LIFO is commonly used in the United States for tax purposes, though it's not permitted under IFRS. COGS = Beginning Inventory + Purchases - Ending Inventory.
When to Use This Calculator
- Inventory Accounting: Calculate COGS using LIFO method
- Tax Planning: Understand COGS for tax purposes
- Financial Reporting: Calculate COGS for financial statements
- Cost Analysis: Analyze inventory costs using LIFO
Understanding LIFO
- Last In, First Out: Most recent inventory is sold first
- Higher COGS: Typically results in higher COGS during inflation
- Lower Taxes: Higher COGS reduces taxable income (tax benefit)
- Lower Inventory: Ending inventory valued at older (lower) costs
Why Use Our Calculator?
- ✅ Inventory Accounting: Calculate COGS using LIFO accurately
- ✅ Tax Planning: Understand COGS for tax purposes
- ✅ Financial Reporting: Calculate COGS for financial statements
- ✅ Cost Analysis: Analyze inventory costs
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What is LIFO (Last In, First Out)?
LIFO (Last In, First Out) is an inventory valuation method where the most recently purchased inventory is assumed to be sold first. Under LIFO, ending inventory is valued at older (typically lower) costs, which typically results in higher COGS and lower ending inventory compared to FIFO, especially during periods of rising prices. LIFO is commonly used in the United States for tax purposes because higher COGS reduces taxable income, though it's not permitted under IFRS.
How is LIFO different from FIFO?
LIFO assumes the most recent inventory is sold first, while FIFO assumes the oldest inventory is sold first. During inflation: LIFO results in higher COGS and lower ending inventory (tax benefit), while FIFO results in lower COGS and higher ending inventory. LIFO better matches current costs with current revenue, while FIFO better matches older costs with current revenue. LIFO is allowed in the US for tax purposes, while FIFO is more common internationally and required under IFRS.
Why use LIFO instead of FIFO?
LIFO is used because: (1) Tax benefits - higher COGS reduces taxable income during inflation, (2) Better matching - matches current costs with current revenue, (3) Inflation protection - reduces tax burden during inflation, (4) Cash flow - lower taxes improve cash flow. However, LIFO has drawbacks: (1) Lower inventory value - ending inventory valued at older costs, (2) Not IFRS compliant - not allowed under IFRS, (3) Complexity - more complex to implement, (4) LIFO reserve - requires LIFO reserve disclosure.
What is the LIFO reserve?
The LIFO reserve is the difference between inventory value under FIFO and inventory value under LIFO. LIFO Reserve = FIFO Inventory Value - LIFO Inventory Value. The LIFO reserve represents the cumulative effect of using LIFO instead of FIFO. A positive LIFO reserve means LIFO inventory is lower than FIFO inventory, which is typical during inflation. Companies using LIFO must disclose the LIFO reserve in their financial statements, allowing investors to compare companies using different inventory methods.