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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.
To calculate using the weighted average method, divide the total cost of items in inventory available for sale by the total number of units available for sale. Let's look at our example. Again, Mega Irrigation had purchased 10 sprinklers for $10.00 and then 20 sprinklers for $20.00.IFO is an acronym for first-in, first-out and means that the oldest inventory items are recorded as sold first. Essentially, FIFO assumes that inventory items are sold in the order in which they are acquired: inventory items bought first are the first ones to be sold, and inventory items bought later are sold later.