Can you please explain the difference between FIFO and LIFO with an - ProProfs Discuss

Can you please explain the difference between FIFO and LIFO with an example?

Asked by Edison, Last updated: May 24, 2024

John Smith

John Smith

Heres an example with calculations: nnote: cogs refers to the cost of the goods that are sold by the company. Assume the following two companies sell hairbrushes for \$10 a piece. the first set of 10 brushes in their inventory cost the companies \$1 each. Both companies then obtained another 10 brushes, but this time paid \$2 each to bring them into their inventory. So at this point, each company has a total of 20 hairbrushes in their inventory and the total cost to bring these brushes into their inventory was \$30 (10 brushes x \$1 + 10 brushes x \$2). Question: now, what would the inventory value be for the fifo company be if they sold 15 hairbrushes? The fifo company sold 15 hairbrushes for \$10 each for total revenue of \$150. Since the first brushes in are deemed to be the first brushes sold, the company sold 10 of the brushes that originally cost them \$1 each and they sold 5 brushes that originally cost them \$2 each. Total revenue = \$150 (15 brushes x \$10 each) cogs = \$20 (10 x \$1 + 5 x \$2) inventory value = \$10 (5 brushes left x \$2) question: what would the inventory value be for the lifo company be if they sold 15 hairbrushes? The lifo company sold 15 hairbrushes for \$10 each for a total revenue of \$150. Since the last brushes in are deemed to be the first brushes sold, the company sold 10 of the brushes that originally cost them \$2 each and they sold 5 brushes that originally cost them \$1 each. Total revenue = \$150 (15 brushes x \$10 each) cogs = \$25 (10 x \$2 + 5 x \$1) inventory value = \$5 (5 brushes left x \$1).