Examples of LIFO, FIFO and Average Cost

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Before using a database, it is important to select the correct work method. The options are:

  • Average Price
  • Last Purchase Price
  • FIFO
  • LIFO
  • Select lots
  • FEFO

As a default setting, Microinvest Warehouse Pro works with Average Cost.

Contents

Average Cost

This method works without lots (batches) and the average price is formed in the following way:

  • Purchase 1: 5 units of Product A x 1 EUR
  • Purchase 1: 3 units of Product A x 2 EUR
  • Purchase 1: 2 units of Product A x 1 EUR

The program multiplies the number of units with the delivery (purchase) price and get a total of (5*1) + (3*2) + (2*1) = 13. Then, division of the derived value of the delivered (purchased) quantity and the average cost for product A is: 13/10 = 1.30 EUR. If the work technology is not followed, it is possible that a mismatch in prices and quantities in reports can result. In order to correct these mismatches, the Edit/Administration/Service Menu/Recalculate Purchase Price and the Edit/Administration/Service Menu/Rebuild Items In Stock are used.

Last Purchase Price

This method is a method without lots and the last entered purchase price is stored. In both methods (Average cost and Last purchase price) only the delivery (purchase) price, which is displayed in the Purchases window, is changed. The reports for past periods do not change.

FIFO

This method works with lots and writing-off of products according to the first incoming lot. An example for operations in a FIFO regime is:

  • Purchase 1: Product A – 10 units, Lot”111”
  • Purchase 1: Product A – 20 units, Lot”222”
  • Purchase 1: Product A – 11 units, Lot”333”

When there is a sale of 12 units of this product, Microinvest Warehouse Pro writes off the product items, starting from the first purchase and not stopping until reaching the necessary quantity, in the example: 10 units from Purchase 1 and 2 units from Purchase 2.

LIFO

This is a method of writing-off of stock according to the last incoming lot. It is completely opposite to FIFO. An example for operations in LIFO regime is:

  • Purchase 1: Product A – 10 items, Lot”111”;
  • Purchase 1: Product A – 20 items, Lot”222”;
  • Purchase 1: Product A – 11 items, Lot”333”.

When there is a sale of 12 units of this product, Microinvest Warehouse Pro writes off the product items, starting from the last purchase and not stopping until reaching the necessary quantity of 12 units, in the example: 11 units from Purchase 3 and 1 unit from Purchase 2.

Select Lots

This is a method of a custom selection of lots and writing-off of stock from the lot, chosen by the operator. An example for operations in a “Select Lots” regime is:

  • Purchase 1: Product A – 10 items, Lot”111”
  • Purchase 1: Product A – 20 items, Lot”222”
  • Purchase 1: Product A – 11 items, Lot”333”

When there is a sale of 12 units of this product, the user selects the lot and the quantity for writing-off. After entering of the quantity in the operations window, a window “Select lot” appears. Here, the operator makes the selection of lot and quantity for write-off. Only the products, available in stock, can be selected.

FEFO

This method works with lots and writes off the products according to their expiry date. During a sales operation, Microinvest Warehouse Pro writes off the products, whose expiry date is the soonest in time. An example for operations in FEFO regime is:

  • Purchase 1: Product A – 10 items, Lot “111”, Expiry date: May 20, 2010
  • Purchase 1: Product A – 20 items, Lot “222”, Expiry date: Sep 3, 2010
  • Purchase 1: Product A – 11 items, Lot “333”, Expiry date: Sep 12, 2010

When there is a sale of 12 units of this product, Microinvest Warehouse Pro will write off 10 product items from Purchase 1 and 2 product items from Purchase 3.

Specific Features

When working with lots, negative quantities and automatic production are automatically disabled.

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