Calculate Gross Profit Rate under FIFO, LIFO, and Weighted Average methods.
Sales Data
Inventory Data (Cost Layers)
FIFO Method (First-In, First-Out)
COGS$0.00
Gross Profit$0.00
Gross Profit Rate0.00%
LIFO Method (Last-In, First-Out)
COGS$0.00
Gross Profit$0.00
Gross Profit Rate0.00%
Weighted Average Method
Avg. Cost/Unit$0.00
COGS$0.00
Gross Profit Rate0.00%
Total Sales Revenue:$0.00
function calculateGrossProfitMethods() {
// 1. Get Inputs
var unitsSold = parseFloat(document.getElementById('unitsSold').value);
var sellingPrice = parseFloat(document.getElementById('sellingPrice').value);
var b1Qty = parseFloat(document.getElementById('b1Qty').value) || 0;
var b1Cost = parseFloat(document.getElementById('b1Cost').value) || 0;
var b2Qty = parseFloat(document.getElementById('b2Qty').value) || 0;
var b2Cost = parseFloat(document.getElementById('b2Cost').value) || 0;
var b3Qty = parseFloat(document.getElementById('b3Qty').value) || 0;
var b3Cost = parseFloat(document.getElementById('b3Cost').value) || 0;
var errorDiv = document.getElementById('gpError');
var resultsDiv = document.getElementById('gpResults');
// 2. Validation
if (isNaN(unitsSold) || unitsSold <= 0 || isNaN(sellingPrice) || sellingPrice totalUnitsAvailable) {
errorDiv.style.display = 'block';
errorDiv.innerHTML = "Error: Units Sold (" + unitsSold + ") cannot exceed Total Inventory Available (" + totalUnitsAvailable + ").";
resultsDiv.style.display = 'none';
return;
}
errorDiv.style.display = 'none';
resultsDiv.style.display = 'block';
// 3. Base Calculation
var totalRevenue = unitsSold * sellingPrice;
// — FIFO CALCULATION —
// Start with Batch 1, then 2, then 3
var fifoCOGS = 0;
var fifoRem = unitsSold;
// Batch 1
if (fifoRem > 0) {
var take = Math.min(fifoRem, b1Qty);
fifoCOGS += take * b1Cost;
fifoRem -= take;
}
// Batch 2
if (fifoRem > 0) {
var take = Math.min(fifoRem, b2Qty);
fifoCOGS += take * b2Cost;
fifoRem -= take;
}
// Batch 3
if (fifoRem > 0) {
var take = Math.min(fifoRem, b3Qty);
fifoCOGS += take * b3Cost;
fifoRem -= take;
}
var fifoGP = totalRevenue – fifoCOGS;
var fifoRate = (fifoGP / totalRevenue) * 100;
// — LIFO CALCULATION —
// Start with Batch 3, then 2, then 1
var lifoCOGS = 0;
var lifoRem = unitsSold;
// Batch 3
if (lifoRem > 0) {
var take = Math.min(lifoRem, b3Qty);
lifoCOGS += take * b3Cost;
lifoRem -= take;
}
// Batch 2
if (lifoRem > 0) {
var take = Math.min(lifoRem, b2Qty);
lifoCOGS += take * b2Cost;
lifoRem -= take;
}
// Batch 1
if (lifoRem > 0) {
var take = Math.min(lifoRem, b1Qty);
lifoCOGS += take * b1Cost;
lifoRem -= take;
}
var lifoGP = totalRevenue – lifoCOGS;
var lifoRate = (lifoGP / totalRevenue) * 100;
// — WEIGHTED AVERAGE CALCULATION —
var totalCostAvailable = (b1Qty * b1Cost) + (b2Qty * b2Cost) + (b3Qty * b3Cost);
var avgCostPerUnit = 0;
if (totalUnitsAvailable > 0) {
avgCostPerUnit = totalCostAvailable / totalUnitsAvailable;
}
var avgCOGS = unitsSold * avgCostPerUnit;
var avgGP = totalRevenue – avgCOGS;
var avgRate = (avgGP / totalRevenue) * 100;
// 4. Output Formatting
document.getElementById('totalRevenueDisplay').innerHTML = "$" + totalRevenue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// FIFO Output
document.getElementById('fifoCOGS').innerHTML = "$" + fifoCOGS.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('fifoGP').innerHTML = "$" + fifoGP.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('fifoRate').innerHTML = fifoRate.toFixed(2) + "%";
// LIFO Output
document.getElementById('lifoCOGS').innerHTML = "$" + lifoCOGS.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('lifoGP').innerHTML = "$" + lifoGP.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('lifoRate').innerHTML = lifoRate.toFixed(2) + "%";
// Weighted Avg Output
document.getElementById('avgCostPerUnit').innerHTML = "$" + avgCostPerUnit.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('avgCOGS').innerHTML = "$" + avgCOGS.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('avgRate').innerHTML = avgRate.toFixed(2) + "%";
}
Understanding Gross Profit Rate Under Different Valuation Methods
Calculating the gross profit rate is a fundamental aspect of financial analysis, but the result depends heavily on the inventory valuation method used. The gross profit rate represents the percentage of revenue that remains after deducting the Cost of Goods Sold (COGS). This calculator helps you compare how three primary methods—FIFO, LIFO, and Weighted Average—affect your bottom line.
The Formula
Regardless of the inventory method, the core formula for Gross Profit Rate is:
Gross Profit = Net Sales – Cost of Goods Sold (COGS)
The variable that changes "under each of the following methods" is the COGS.
1. FIFO (First-In, First-Out)
Under the FIFO method, it is assumed that the oldest inventory items are sold first. In an economy with rising prices (inflation), this typically results in:
Lower COGS (using older, cheaper costs).
Higher Gross Profit.
Higher Gross Profit Rate.
FIFO is often preferred by companies wanting to show strong profit margins to investors, though it may result in higher income tax liabilities.
2. LIFO (Last-In, First-Out)
Under the LIFO method, the most recently purchased items are assumed to be sold first. In an inflationary environment, this results in:
Higher COGS (using newer, more expensive costs).
Lower Gross Profit.
Lower Gross Profit Rate.
Companies may choose LIFO for tax advantages, as reporting lower profits can reduce the immediate tax burden.
3. Weighted Average Cost
This method smooths out price fluctuations. It calculates a single average cost per unit based on the total cost of goods available for sale divided by the total units available. The COGS is then determined by multiplying this average cost by the number of units sold. The resulting gross profit rate usually falls between FIFO and LIFO.
Why This Matters
Understanding these differences is crucial for inventory management, pricing strategies, and financial reporting. A business might look highly profitable under FIFO but less so under LIFO, simply due to the timing of inventory purchases and cost flow assumptions.