LIFO Calculator

Formula

The formula to calculate the Cost of Goods Sold (COGS) using LIFO is:

\[ \text{COGS} = \text{CU} \times \text{US} \]

Where:

$\text{COGS}$ is the Cost of Goods Sold ($)
$\text{CU}$ is the Cost per Unit of the most recent units added to inventory ($/unit)
$\text{US}$ is the Total Number of Units Sold (units)

What is LIFO?

LIFO stands for last-in, first-out. It’s a method of accounting used in businesses where the most recent cost (last-in) of inventory is used as the cost basis for the most recent sold (first-out) units of a good. For example, if a business owner stores inventory every month, and the first month he adds inventory at a cost of $50.00, but then in the current month the cost went up to $100.00/ea, then they would use $100.00 as the cost basis for any units sold that month. This reduces the total profit realized for that month, but it will reduce taxes.

Example Calculation

Let's assume the following values for an example:

Cost per Unit (CU) = $100.00
Total Number of Units Sold (US) = 50 units

Using the formula:

\[ \text{COGS} = 100 \times 50 = 5000 \, \text{\$} \]

The Cost of Goods Sold (COGS) is $5000.