# Inventory Cost Valuation – Excel Example

Inventory includes raw materials, work-in-progress, and finished goods. The way firms value their stock has a direct impact on the costs of goods sold, inventory ending value, and hence overall profitability.

This template illustrates how inventory purchase prices affect inventory costs, under three different cost flow methods:

• First-In, First-Out (FIFO)
• Last-In, First-Out (LIFO)
• Weighted Average Cost (WAVCO)

In Scenario 1 – we calculate and compare COGS, Gross Profit, and Inventory Closing Balance under the assumption of rising prices (inflationary environment).

In Scenario 2 – we calculate and compare COGS, Gross Profit, and Inventory Closing Balance under the assumption of falling prices (deflationary environment).

Some other related topics you might be interested to explore are Inventory Cost valuation.

This is an open-access Excel model in XLSX format that will be useful for anyone who wants to work as an Accountant, Financial Analyst, or Finance Manager.

Inventory cost valuation is included in the Financial Reporting module of the CFA Level 1 Curriculum.

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