Inventory Valuation Calculator: FIFO vs Weighted Average

About the inventory valuation calculator

When you buy the same item at different prices, the cost you assign to units sold depends on your costing method. FIFO (first in, first out) assumes the oldest stock is sold first. Weighted average spreads the total cost evenly over every unit. This calculator applies both methods to the same purchase lots so you can see the effect on cost of goods sold, closing stock and profit.

How to use it

1. List your opening stock and each purchase lot in order, oldest first, with units and cost per unit.
2. Enter the number of units sold in the period.
3. Compare cost of goods sold and closing stock value under FIFO and weighted average.

Tips

• Prices rising? FIFO shows higher profit. When costs are going up, FIFO charges the older, cheaper stock to cost of goods sold, so reported profit is higher than under weighted average.
• Be consistent. Pick one method for each class of inventory and stick to it from period to period. Switching only to move profit around is not acceptable accounting.
• Check what your standards allow. Indian accounting standard AS 2 permits FIFO and weighted average cost and does not permit LIFO. Confirm the rules for your jurisdiction with your accountant.

Frequently asked questions

What is the difference between FIFO and weighted average?

FIFO assigns the oldest purchase cost to units sold first. Weighted average uses one blended cost per unit, calculated from total cost divided by total units available.

Does this calculator handle LIFO?

No. LIFO is not permitted under Indian accounting standards, so it is left out.

Is this the periodic or perpetual method?

The weighted average here is the periodic method: one average over the whole period. A perpetual system recalculates the average after every purchase, which can give slightly different numbers.

Is the calculator free?

Yes. It is free with no signup, and your numbers stay in your browser.