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since LIFO uses the most recent prices of goods purchased in order to determine the cost of goods sold this can end up with these layers that are accumulating and when you have an old layer of inventory that is sold off or erode it when you have this erosion of a LIFO layer that can lead to dramatically higher income and so thats a little abstract so lets get into an example lets say that you sell horse manure for fertilizer and so lets look at your inventory here so heres your inventory and Im just gonna show you some purchases that youve had so lets say in in 2017 you purchase 8,000 pounds of horse manure at a cost of $1.00 per pound now because youre using LIFO if the price were to increase for example to $5 a pound the price were to increase to $5 a pound you bought another 500 pounds lets say after this 8,000 so if you did that lets say then you then sold 40 pounds of it so the 40 pounds would come out of this 500 that you most recently purchased right lets say that th
