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Inventory Management Assumptions - FIFO, LIFO and Average Cost Methods
This video demonstrates the different methods of inventory tracking and accounting inventory assumptions.
In this video, Stefan Ignatovski demonstrates various methods of tracking your business' inventory and inventory costs.
This video will show how to use different inventory assumptions in order to make your business more efficient. Firstly, Stefan walks through the FIFO process. This process means that the first products bought in are the first to be sold. Using his T-Shirt example, Stefan simply breaks down the FIFO process making it incredibly easy to understand. This video will show how the FIFO method can be used to help you save time and increase efficiency, whilst also giving you the means to calculate your gross profit per product. Stefan then contrasts the FIFO method with the LIFO method, in which whatever is bought last is then the first to be sold. This will show you how cost and gross profit can be calculated based on this method.
Next, Stefan gives an overview of the average cost method, which doesn't use adhere to either LIFO or FIFO methods. Instead, an average price of each product is found and used in calculating cost of goods and gross profit per item.
Then, Stefan compares the three different methods with one another, highlighting their benefits and downfalls, allowing you to establish which method may be the best for your business context.
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