Calculate cost of goods sold and ending inventory using the FIFO method. Assign oldest purchase costs to sales first for accurate COGS.
The First-In, First-Out (FIFO) method assigns the oldest inventory costs to Cost of Goods Sold (COGS) first. Units purchased earliest are assumed to be sold first, so ending inventory reflects the most recent purchase prices. FIFO is one of the most widely used inventory costing methods under both GAAP and IFRS.
In periods of rising prices, FIFO produces lower COGS and higher net income compared to LIFO, because the cheaper, older costs are matched against revenue. Conversely, ending inventory is valued closer to current replacement cost, giving a more accurate balance sheet figure.
This simplified calculator lets you enter up to three purchase lots and a number of units sold. It applies FIFO logic to compute COGS, ending inventory value, and the average cost per unit sold.
Supply-chain managers, warehouse operators, and shipping coordinators rely on precise fifo inventory cost data to maintain efficiency and control costs across complex distribution networks. Revisit this calculator whenever conditions change to keep your logistics plans aligned with real-world performance.
FIFO is required under IFRS and preferred by many US companies for its intuitive logic — sell the oldest stock first. This calculator helps accountants, inventory managers, and students quickly work through FIFO cost layering without manual spreadsheets, ensuring accurate COGS and ending inventory figures. Real-time recalculation lets you model different scenarios quickly, ensuring your logistics decisions are backed by accurate, up-to-date numbers.
FIFO COGS: Assign costs from the oldest lot first until units sold are exhausted. COGS = Σ(Units from each lot consumed × Unit Cost of that lot) Ending Inventory = Total Inventory Cost − COGS
Result: COGS = $1,240
Under FIFO, the first 100 units sold come from Lot 1 at $10 = $1,000. The remaining 20 units come from Lot 2 at $12 = $240. COGS = $1,000 + $240 = $1,240. Ending inventory = 130 units at $12 = $1,560.
Under FIFO, each purchase at a distinct cost creates a "layer." When units are sold, costs are drawn from the oldest layer first. Once a layer is fully consumed, the next oldest layer is used. This continues until all sold units have been costed.
During inflation, FIFO assigns lower, older costs to COGS, inflating gross profit and taxes. During deflation, FIFO assigns higher, older costs to COGS, reducing reported profit. Understanding this dynamic is essential for tax planning and financial analysis.
Most modern ERP and WMS systems automate FIFO cost layering. Manual tracking is feasible for small businesses with few SKUs. Regardless of method, consistent application period over period is required by accounting standards.
FIFO stands for First-In, First-Out. It assumes the earliest purchased inventory is sold first. The cost of the oldest units is assigned to COGS, and the newest units remain in ending inventory.
FIFO is ideal when inventory has a shelf life (food, chemicals, pharmaceuticals) or when you want ending inventory to reflect recent market prices. It is required under IFRS and commonly used in US GAAP.
In periods of rising prices, FIFO produces lower COGS and higher taxable income compared to LIFO. This means higher tax payments but a more favorable balance sheet with higher reported assets.
Not necessarily. FIFO is a cost flow assumption — it determines how costs are assigned regardless of which physical units are actually shipped. However, for perishable goods, FIFO cost flow usually mirrors physical flow.
Yes, but changing accounting methods requires disclosure and, under US GAAP, may require restatement of prior period financials. Consult an accountant before switching inventory costing methods.
There is no limit. Each purchase at a different price creates a new cost layer. In practice, ERP systems manage hundreds of layers automatically. This calculator supports up to three layers for simplicity.