THE PLAYGROUND
Follow the inventory layers
Same stockroom. Different cost allocation.
LIVE EXPERIMENT
Follow the inventory layers
FIFO cost of goods sold1,320
Before you move a sliderWhen input prices rise, which method produces more gross profit?
Cost available = 100 × 10 + 100 × 16 = 2600
READ THE MECHANISM
In both methods, COGS plus ending inventory equals total cost available. With rising costs, FIFO assigns older cheaper costs to sales first. Cash spent on the purchases is identical; the timing of expense recognition differs.
Model assumptions & units
Two purchases of 100 units each, no beginning stock or write-downs. Compare FIFO with periodic weighted average. Both are cost-allocation methods; neither proves the physical order of shipment.