MRP glossary TOP > Inventory Control > First-in First-out FIFO
First-in First-out FIFO
First-in First-out FIFO
It is a method for inventory valuation or the delivery unit calculation, where a calculation is done based on the rule where the first-in item is to be first taken out of warehouse. This idea is just like train cars passing through the tunnel, where the tunnel can be compared to a warehouse while train cars can be compared to goods in stock. In this case, the train car entered first into the tunnel (inventory) takes out of the tunnel (warehouse) in the order of entering. The merit of using this method is to calculate the inventory valuation by the latest cost. The following is one example of the First-in First-out method.
Related term: Cost Approach
It is a method for inventory valuation or the delivery unit calculation, where a calculation is done based on the rule where the first-in item is to be first taken out of warehouse. This idea is just like train cars passing through the tunnel, where the tunnel can be compared to a warehouse while train cars can be compared to goods in stock. In this case, the train car entered first into the tunnel (inventory) takes out of the tunnel (warehouse) in the order of entering. The merit of using this method is to calculate the inventory valuation by the latest cost. The following is one example of the First-in First-out method.
Related term: Cost Approach
Reference：JIT Business Research Mr. Hirano Hiroyuki