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final section
| November || 10 || $12
| November || 10 || $12
|-
|-
| December || 15 || $14
| December || 10 || $14
|}
|}
The inventory value as of the end of the fiscal year is $540.
The inventory value as of the end of the fiscal year is $360.
During January, the Eagles Landing Garden Club purchases five units of SuperPlant, the only sale during the month. Under FIFO, the five items sold are removed at $10 each (the oldest cost); the remaining inventory is valued as follows: (5 units x $10) + (10 units x $12) + (15 units x $14) = $380.
During January, the Eagles Landing Garden Club purchases five units of SuperPlant, the only sale during the month. Under FIFO, the five items sold are removed at $10 each (the oldest cost); the remaining inventory is valued as follows: (5 units x $10) + (10 units x $12) + (10 units x $14) = $310.
==LIFO==
==LIFO==
===Example===
===Example===
Using the garden center example above, under LIFO the five items sold are removed at $14 each (the newest cost); the remaining inventory is valued as follows: (10 units x $10) + (10 units x $12) + (10 units x $14) = $360.
Using the garden center example above, under LIFO the five items sold are removed at $14 each (the newest cost); the remaining inventory is valued as follows: (10 units x $10) + (10 units x $12) + (5 units x $14) = $290.
==Weighted Average Cost==
Under this method, items are removed from inventory based on a weighted average of all purchase costs shown in the accounting records.
The weighted average can be calculated one of two ways:
*One method is to calculate the average at the beginning of the year, use it throughout the year, then adjust the average at year-end to account for inventory shrinkage and purchases throughout the year.
*The other method is to continually calculate the average to account for purchases and sales throughout the year, with a final adjustment at year-end to account for inventory shrinkage (this method is also called "moving average"). With the advent of computerized inventory and accounting software this method is the most commonly used.
===Example==
Using the garden center example above, the weighted average cost at the beginning of the year is as follows: (10 units x $10) + (10 units x $12) + (10 units x $14) = $360 / 30 units = $12/unit.
When the five units are sold, they are removed at $60 (5 units @ $12 each), and the remaining inventory valuation is $300 (25 units x $12 average cost). Under a moving average method, if the center purchases 15 more units at $14 each (total $210), the valuation is now $510, with 40 units in stock; the new weighted average is $12.75 per unit.
[[Category:Accounting]]
[[Category:Accounting]]