Walk through a simple inventory timeline by hand, tracking units available and units remaining
Track Inventory Through Time
Now let's walk through Sarah's month day by day and see how inventory changes at each step.
Physical flow tracks boxes on the shelf
Cost flow tracks dollars into COGS or inventory
Layers form when purchases happen at different costs
In Phase 2, you saw layers at a single point. Now let's think about what happens as time passes:
Month starts with Layer 1 already on the shelf (Beginning Inventory)
Day 3 adds Layer 2 when Sarah buys more kits at a new price
Day 15 adds Layer 3 when supplier prices rise again
Each sale pulls from one or more layers, changing what remains
The key skill is tracking both quantity and value at each step. In this activity, you'll walk through Sarah's month event by event. At each step, calculate what happens to units on hand and inventory value.
Now it's your turn. Walk through each day of Sarah's month. Calculate what happens to units on hand and inventory value at each step, then check your answer.
📝 How to Complete This Activity:
- Read the Transaction Details to see what happened (purchase or sale)
- Check the Starting Point to see where you're beginning from
- Calculate the new units on hand and inventory value
- Click "Check My Answer" to see if you're correct
- Click "Next Event" to continue through the month
Month begins. Sarah counts what's already on the shelf.
📊 Running Totals at Day 1 Start:
This is the first event of the month. No prior activity.
📋 Transaction Details (What You Know):
🔒 Calculate your answers above, then click "Check My Answer" to see the running totals after this event.
Discussion prompt (3 minutes):
- At which event in the timeline did inventory value change the most? Why?
- Why does a sale affect both units AND inventory value at the same time?
- What would happen if Sarah forgot to record one of the purchases?
By the end of Sarah's month, you can see exactly where every unit went and how much value remains. But notice something: we had to make assumptions about which layer costs went to COGS on each sale.
That's what Lesson 3 is about: learning the formal rules (FIFO, LIFO) that tell you exactly how to assign costs, so you don't have to guess.