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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.
Using the weighted average cost method, our closing inventory amounts to $1,059. This equates to a cost of $1.06 per lollypop ($1,059/1,000 lollypops). Oddly enough, the LIFO method is the preferred inventory valuation method in the United States but is disallowed in non-US countries.The FIFO method and the weighted average cost method are used in non-US countries.In recent years there have been calls for the standardization of accounting rules throughout the world, and talk specifically about disallowing LIFO in the US (or making the rest of the world follow the LIFO system).. This method assumes that the last inventories bought are the first ones to be sold, and that inventories bought first are sold last. The value of our closing inventories in this example would be calculated as follows: Using the Last-In-First-Out method, our closing inventory comes to $1,000.