Price Level Index
ending inventory
A price index measures the change in prices for specific items, a group of items or the economy in general. To determine a price index the following is needed:
Known prices at the beginning of the period (the first period used is referred to as the "base" year)
Known prices at the end of the period for the same quantity of goods.
Year
quantity
actual price/unit
total price
Year 1
2000
$2
$4,000
Year 2
1500
$2.60
$3,900
Year 3
2200
$2.80
$6,160
Year 4
2100
$3
$6,351
Calculation of Price Index:
Index
Index (base 100)
Calculation of Price Index:
Formula: ending inventory at current cost/ending inventory at base cost. Usually, the resulting value is multiplied by 100.
An example of dollar value LIFO follows: 
Year 2
1500
$2.60
$3,900
at base
1500
$2
$3,000
1.3
130
Year 3
2200
$2.80
$6,160
at base
2200
$2
$4,400
1.4
140
Year 4
2100
$3
$6,351
at base
2100
$2
$4,200
1.5
150