First In, First Out

First In, First Out

About First In, First Out:

First In, First Out (FIFO) is a method of inventory valuation in which the cost of goods sold is charged with the cost of raw materials, semifinished goods, and finished goods purchased first, and in which inventory contains the most recently purchased materials. In times of rapid inflation, FIFO inflates profits, since the least expensive inventory is charged against the cost of current sales, resulting in inventory profits. As a consequence, last in, first out (UFO) inventory valuation has become a more popular method, since it reduces current taxes by eliminating inventory profits. See: FIFO.


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