Calculated Cost explained: First in First Out
- Cost is calculated as the first inventory value brought in for an item. Meaning If you buy 10 @ $10 and then 15 @ $25, the cost of an item will be $10 until the first 10 are depleted. Then the cost will be $25.
- Many things can impact the timeline of FIFO
- Backdating documents
- Sales depleting inventory
- If our example we could buy 10 @ $10, then transfer 4 @ $10 at 4:30pm but then our sync runs and pulls in sales and we actually sold 10 @ $10 at 4:00pm. BC we are inserting adjustments prior to our transfer, the COGS will be $10.
- So what do you do? Back date transfers to allow for the incoming of hourly sales if needed.
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