The first thing we need to calculate is the units of ending inventory.
As inventory is sold, the basis for those items is assumed to be the average inventory cost at the time of their sale.
If you are running a business, you are looking for all the tax breaks that you can get.
Last in, first out (LIFO) is only used in the United States where any of the three inventory-costing methods can be used under generally accepted accounting principles.
LIFO might be a good option if you operate in the U.S. and the costs of your inventory are increasing or are likely to go up in the future.
This is best for businesses that move a low volume of high cost products.
