Examples in calculation for FIFO, LIFO and AVECO?

FIFO (First In, First Out):

Let's say a company purchases 100 units of a product at $10 each on January 1st, and then purchases another 100 units at $12 each on January 15th. If the company sells 150 units on January 20th, the cost of goods sold under FIFO would be calculated as follows:

Cost of goods sold = (100 units x $10) + (50 units x $12) = $1000 + $600 = $1600

LIFO (Last In, First Out):

Using the same example as above, if the company uses LIFO, the cost of goods sold would be calculated as follows:

Cost of goods sold = (50 units x $12) + (100 units x $10) = $600 + $1000 = $1600

AVECO (Weighted Average Cost):

In this method, the cost of goods sold is calculated by taking the average cost of all units available for sale. Using the same example as above, the cost of goods sold under AVECO would be calculated as follows:

Average cost per unit = [(100 units x $10) + (100 units x $12)] / 200 units = ($1000 + $1200) / 200 = $11

Cost of goods sold = 150 units x $11 = $1650

FIFO (First-In, First-Out)

- Beginning inventory: 10 units at $10
- Purchase 1: 20 units at $12
- Purchase 2: 30 units at $14
- Sale: 40 units

Calculation:

- First, use the 10 units from beginning inventory at $10.
- Then, use 30 units from Purchase 1 at $12.

Ending inventory:

- 10 units at $14 (cost of Purchase 2)

Cost of Goods Sold:

- 40 units x $12 = $480

LIFO (Last-In, First-Out)

- Beginning inventory: 10 units at $10
- Purchase 1: 20 units at $12
- Purchase 2: 30 units at $14
- Sale: 40 units

Calculation:

- First, use the 30 units from Purchase 2 at $14.
- Then, use 10 units from Purchase 1 at $12.

Ending inventory:

- 10 units at $10 (cost of beginning inventory)

Cost of Goods Sold:

- 40 units x $14 = $560

AVECO (Average Cost)

- Weighted average cost per unit:
- ((10 x $10) + (20 x $12) + (30 x $14)) / (10 + 20 + 30)
- = $12.67

Calculation:

- Ending inventory:
- 10 units x $12.67 = $126.70

- Cost of Goods Sold:
- (40 units - 10 units) x $12.67
- = $380.10