1. What is LIFO COGS?

LIFO (Last-In, First-Out) COGS (Cost of Goods Sold) is an accounting method where the most recently acquired inventory items are assumed to be sold first. This affects cost calculations and tax liabilities.

2. How Does the Calculator Work?

The calculator uses the LIFO COGS formula:

Where:

• \( \text{Last In} \) — Cost per unit of most recently acquired inventory (currency/unit)
• \( \text{Sold} \) — Number of units sold (units)

Explanation: The formula multiplies the cost of the most recent inventory purchases by the number of units sold to determine the cost of goods sold.

3. Importance of LIFO Calculation

Details: LIFO COGS calculation is important for accurate financial reporting, tax calculations, and inventory management, especially in periods of inflation.

4. Using the Calculator

Tips: Enter the cost per unit of your most recent inventory purchase and the number of units sold. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: When should I use LIFO method?
A: LIFO is most beneficial when inventory costs are rising, as it results in higher COGS and lower taxable income.

Q2: What's the difference between LIFO and FIFO?
A: FIFO assumes oldest inventory is sold first, while LIFO assumes newest inventory is sold first, leading to different COGS and tax implications.

Q3: Is LIFO allowed under all accounting standards?
A: LIFO is permitted under U.S. GAAP but prohibited under IFRS (International Financial Reporting Standards).

Q4: How does LIFO affect financial statements?
A: In inflationary periods, LIFO typically shows lower profits (higher COGS) and lower ending inventory values on the balance sheet.

Q5: What is LIFO reserve?
A: LIFO reserve is the difference between inventory value under FIFO and LIFO methods, important for financial analysis.