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Using FIFO, you calculate the cost of goods sold expense as follows: In short, you use the first three units to calculate cost of goods sold expense. The cost of the ending inventory asset, then, is $106, which is the cost of the most recent acquisition.The $412 total cost of the four units is divided between $306 cost of goods sold expense for the three units sold and the $106 cost of the one unit in ending inventory.The total cost has been accounted for; nothing has fallen between the cracks.he $412 total cost of the four units is divided between $306 cost of goods sold expense for the three units sold and the $106 cost of the one unit in ending inventory. The total cost has been accounted for; nothing has fallen between the cracks.
In comparing the FIFO (first-in, first-out) and weighted-average methods for calculating equivalent units. The FIFO method is better than the weighted-average method for judging the performance in a period independently from performance in preceding periods. The calculation of the cost per equivalent unit using the FIFO method keeps the costs in one period separate from the costs of prior periods. Under the weighted-average method, the costs in the beginning work-in-process inventory are combined with current-period costs.