Inventory Valuation Calculator (FIFO / LIFO / Average)

Three accounting methods can assign different costs to the same units sold — and produce different ending inventory values and COGS. FIFO assumes oldest stock leaves first; LIFO assumes newest leaves first; Weighted Average recomputes a running average after each purchase. Under rising prices, FIFO shows the highest profit and ending inventory; LIFO shows the lowest. Under IFRS (and SOCPA in Saudi Arabia), LIFO is not permitted — but this tool models it for teaching and US-GAAP audiences.

How each method draws cost

All three accept the same purchases + sales feed. They differ only in which layer (or average) each sale pulls from:

FIFO: sale draws from oldest layer first | LIFO: sale draws from newest layer first | WAvg: sale draws at running average cost = total value ÷ total units

Worked example

Buy 100 @ 10, buy 100 @ 12, sell 80, buy 100 @ 15, sell 90, sell 50 — rising prices:

1. Total purchased: 300 units for 3,700 SAR
2. Total sold: 220 units; ending units across all methods = 80
3. FIFO: ending inventory = 80 @ 15 = 1,200 SAR; COGS = 2,500 SAR
4. LIFO: ending inventory = 80 @ 10 = 800 SAR; COGS = 2,900 SAR
5. WAvg: ending value ≈ 1,000 SAR; COGS ≈ 2,700 SAR (depends on rounding)
6. FIFO highest profit, LIFO lowest — under rising prices

Practical tips

• Saudi Arabia (under SOCPA / IFRS) does not allow LIFO for financial reporting — use FIFO or Weighted Average for your statements.
• Once chosen, the method must be applied consistently across periods (consistency principle).
• Weighted Average is computationally simplest and matches how most ERP systems calculate cost on the fly.
• If prices are rising, FIFO inflates profit (good for valuations, but higher tax). Under falling prices, the opposite.
• Pair this tool with the Reorder Point calculator to plan replenishment around the same transaction log.