FIFO and LIFO Costing Methods
Although these two costing methods differ in the way they calculate costs, they are similar enough to be discussed together.
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First-In, First-Out (FIFO) costing method. Under this method of cost calculation, Inventory Control assumes that the first units to arrive at a location are the first units shipped. Consequently, the units on hand in the closing inventory are assumed to be from the most recent purchases. As a result, current revenues are matched to oldest costs.
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Last-In, First-Out (LIFO) costing method. Under this method of cost calculation, the program assumes that the last units to arrive at a location are the first ones shipped. Consequently, the units on hand in the closing inventory are assumed to be from the oldest purchases.
Inventory balance. The inventory balance is calculated the same way for both FIFO and LIFO, by summing the costs from all buckets.
Item Status report. The Item Status report includes the information contained in each bucket, including the offset bucket.
See also
Most recent cost costing method