The First-In-First-Out FIFO Method
- October 27, 2023
Of the 140 remaining items in inventory, the value of 40 items is $10/unit and the value of 100 items is $15/unit because the inventory is assigned the most recent cost under the FIFO method. Three units costing $5 each were purchased earlier, so we need to remove them from the inventory balance first, whereas the remaining seven units are assigned the cost of $4 each. FIFO is a straightforward valuation method that’s easy for businesses and investors to understand. It’s also highly intuitive—companies generally want to move old inventory first, so FIFO ensures that inventory valuation reflects...
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