How this calculator works
FIFO, first in first out, assumes the oldest units are sold first. Sales consume the earliest purchase layer, then the next, until the units sold are covered. The cost of those consumed units is the cost of goods sold. Whatever remains in each layer is the ending inventory. In a period of rising prices FIFO reports a lower cost of goods sold and a higher ending inventory than last-in, first-out costing would. Enter the layers oldest first, and use the same unit for quantities and selling price.
Formula
Cost of goods sold = sum over the oldest layers of (units taken from the layer × its unit cost), taking just enough units to cover the quantity sold. Ending inventory = sum over the remaining units in each layer × its unit cost. Revenue = units sold × selling price. Gross profit = revenue - cost of goods sold.
Worked example
Layers of 100 units at $10, 150 at $12 and 200 at $15 total 450 units. Selling 300 units takes all 100 at $10 and all 150 at $12, then 50 at $15. Cost of goods sold is $1,000 + $1,800 + $750 = $3,550. The 150 units left are valued at $2,250. Revenue at $25 is $7,500 and gross profit is $3,950.
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Frequently asked questions
Why does FIFO matter?
The cost flow method changes reported profit and inventory value when purchase prices change. FIFO matches older, often cheaper, costs against current revenue, so in a period of inflation it usually reports higher profit and a higher inventory balance than LIFO.
What if units sold exceed the units purchased?
There is no layer to draw from, so the shortfall would be negative inventory. The calculator rejects that case as a data error. Check whether opening inventory from an earlier period should be added as a layer.
How many layers can I enter?
Up to ten purchase layers, which is enough for a period with weekly or monthly buying. Group purchases that share the same unit cost into one layer to keep within the limit.