Methods for Calculating Inventory Cost: FIFO, LIFO, Weighted

School: University of Illinois, Urbana Champaign - Course: ACCY MISC - Subject: Accounting

Three inventorylostflow methodsInventorycost flow methods are assumptions to calculate 1 FIFO the amountofendinginventoryCoas they dont 2LI tohave to be consistentwiththe actual flow of goods 3Weighted Ave Ave cost FIFO First in Firstout Assumetheoldestinventor items are sold first This the costof the oldest inutory itemspurchasedmakeupthe Coors on the income statement The endinginventor consistsof the costofthe most recent inventory items purchand LIFO Last in firstout Assumemostrecent inventoryitems purchand arethefirst sold Thus the cost ofthe most recently purchasedinventory itemsmark up the cobson the incomestatement The ending inventory consistsof the cost of the oldest inventory items purchased WeightedAve Au cost Assumeallinventory itemshave the samecost Thusold or newunitsdoesntmatter bcwe assumeall units herethe same cost The same costiscalled the weighted Ave cost per unit costof beginning inventoryweighted Ave costof Purchases costper Unis in beginning inunm unit units purchased µ also seenas weighted Ave costof goodsavailable for sale costper units Avasableforsale unit

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