What is the LIFO method?

LIFO (Last-In, First-Out) is an inventory costing method that assumes the most recently purchased items are the first ones sold. Under LIFO, COGS reflects the newest (usually higher) costs, while ending inventory retains older, often lower costs.

How does LIFO affect taxes?

In periods of rising prices, LIFO produces higher COGS and lower taxable income compared to FIFO, which can reduce current tax liability. This is why many US companies choose LIFO for tax purposes, though it is not permitted under IFRS.

What if I sell more units than I have in stock?

The calculator will display an error if the units sold exceed the total available inventory. Reduce the units sold or add more purchase layers to cover the quantity.

Can I use this for periodic or perpetual LIFO?

This tool calculates periodic LIFO — it considers all purchases for the period and applies LIFO cost flow at period end. Perpetual LIFO is computed at each sale transaction date and may yield different results.

What is a LIFO layer?

A LIFO layer (or "increment") is each batch of inventory purchased at a specific cost. The calculator lists each purchase as a separate layer and shows which layers are fully consumed, partially consumed, or untouched by the period's sales.

LIFO Inventory Calculator

Name: LIFO Inventory Calculator
Availability: InStock
Author: Nham Vu

Enter inventory purchases and units sold to compute ending inventory value and cost of goods sold under the LIFO method.

Inventory Purchase Layers

Units Sold This Period

Total units sold from all inventory layers combined.

LIFO Layer Breakdown

Newest layers are consumed first.

Layer	Units Purchased	Unit Cost	Units Sold	Units Remaining	Ending Value

Add purchase layers and units sold,
then click Calculate LIFO.

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Summary

Enter inventory purchases and units sold to compute ending inventory value and cost of goods sold under the LIFO method.

How it works

Add each inventory purchase layer: date/label, quantity purchased, and unit cost.
Enter the total number of units sold during the period.
Click "Calculate LIFO" to run the cost-flow algorithm.
The tool depletes the most recent layers first (LIFO order) to assign costs to COGS.
Remaining units from earlier layers form the ending inventory at their original costs.
Review the per-layer breakdown table and summary totals.

Use cases

Prepare COGS figures for income statements using LIFO.
Compare LIFO vs FIFO impact during periods of rising or falling prices.
Audit inventory cost-flow assumptions for accounting accuracy.
Study or teach the LIFO method with a step-by-step layer breakdown.
Estimate taxable income under LIFO when prices are rising.
Validate manually computed LIFO figures before filing financial statements.

Frequently Asked Questions

Last updated: 2026-06-11 · Reviewed by Nham Vu