Students complete two independent practice tasks (Specific ID and Weighted Average), then synthesize with a four-method comparison matrix.
Apply What You've Learned
You've learned all four inventory methods across Lessons 2, 3, and today. Now practice both Specific Identification and Weighted Average independently, then decide which method fits each business.
Lesson 3: FIFO & LIFO
- •FIFO: Oldest costs to COGS first
- •LIFO: Newest costs to COGS first
- •Both assume layer order without tracking
Lesson 4: Today
- •Specific ID: Track exact items by serial/VIN
- •Weighted Avg: Pool costs, one average rate
- •Each fits different inventory types
Key distinction: FIFO/LIFO make assumptions about cost flow. Specific ID tracks exact items. Weighted Average pools everything together.
Work through both tabs below. For Specific Identification, track each item by its unique identifier. For Weighted Average, pool all costs and calculate one average rate.
Click "New Numbers" to try again with different data.
Premier Auto Sales
Used Car Dealership — Tracking vehicles by VIN
Premier Auto has 5 vehicles in inventory. Each has a unique VIN and tracked cost.
2024 Sedan
Cost: $28,500
2024 SUV
Cost: $35,200
2023 Truck
Cost: $31,800
2024 Sedan
Cost: $29,100
2023 SUV
Cost: $33,900
Goods Available for Sale: 5 vehicles × tracked costs = $158,500
Now that you've practiced both calculations, decide which method best fits each business. Consider what the business sells, whether items are trackable, and any special needs.
Your task: For each business, select the inventory method that best fits. Think about whether items are unique/trackable or identical/pooled, and any special business needs.
Luxe Jewelry Boutique
High-end rings, necklaces, and watches. Each piece has a unique appraisal certificate.
Metro Gas Station
Regular and premium fuel in underground tanks. Deliveries mix together in storage.
FreshMart Grocery
Fresh produce, dairy, and packaged foods. Items need to sell before they expire.
SoundWave Electronics
Smartphones and laptops. Costs have been rising steadily. Manager wants lower taxable income.
Premier Auto Sales
New and used vehicles. Each car has a unique VIN and individual cost.
BeanWholesale Coffee
Bulk coffee beans in silos. Different deliveries mix together in storage.
Key Takeaway:
The "best" method depends on what you're tracking and why it matters. No method is universally better — each has a proper business context where it makes the most sense.
Discussion Prompt (5 minutes):
- Which method felt most intuitive to you? Which felt hardest?
- Why would a car dealership never use Weighted Average?
- What business did you choose FIFO for? Why not LIFO for the same business?
- If gas prices keep rising every month, what happens to a gas station's profit under Weighted Average vs FIFO?
Specific Identification
- ✓ Track each unique item by serial/VIN/certificate
- ✓ No assumptions — you know exactly what sold
- ✓ Best for: cars, jewelry, custom equipment
- ✗ Can't use for identical bulk items
Weighted Average
- ✓ Pool all costs, divide by total units
- ✓ Same rate for COGS and Ending Inventory
- ✓ Best for: grain, fuel, bulk commodities
- ✗ Don't average the prices — divide total cost
Coming in Lesson 5: You'll move from hand calculation to Excel workbook construction. You'll build a model that compares all four methods and helps you recommend the right one for each business.