FIFO and LIFO: Two Ways to Value the Same Inventory
Lesson 2 established that cost assignment is ambiguous when inventory layers have different prices. Lesson 3 introduces the first two standardized methods—FIFO and LIFO—that resolve this ambiguity. Students learn both the mechanics and the business consequences of each method, preparing them to make and defend method recommendations.
- ▶Calculate Cost of Goods Sold and Ending Inventory using FIFO (First-In, First-Out) method
- ▶Calculate Cost of Goods Sold and Ending Inventory using LIFO (Last-In, First-Out) method
- ▶Explain how FIFO and LIFO produce different COGS and Ending Inventory values from identical transactions
- ▶Identify business situations where FIFO or LIFO may be strategically preferred
- ▶Analyze the impact of rising vs. falling prices on FIFO vs. LIFO outcomes
This lesson follows a structured 6-phase learning model designed for authentic project-based learning.
Hook
Connect to Lesson 2's ambiguity and introduce FIFO and LIFO as two standardized solutions
Introduction
Teach FIFO and LIFO mechanics with visual layer movement, then explore business consequences
Guided Practice
Scaffolded practice assigning costs to sales using FIFO and LIFO with validation
Independent Practice
Independent calculation of FIFO and LIFO with business recommendation
Assessment
Assess understanding of FIFO and LIFO calculations and appropriate use cases
Closing
Reflect on FIFO vs LIFO tradeoffs and preview Specific Identification and Weighted Average in Lesson 4