It is an expense and is reported on the income statement as part of the cost of sales. COGS represents the cost of the inventory that has been sold during a period and thus reduces a company’s profits. Average Cost assigns an average cost per unit based on all the purchases made during a given period of time. It simplifies …
What Is The FIFO Method? FIFO Inventory Guide
Originally, Susan bought 80 boxes of vegan pumpkin dog treats at $3 each. Later on, she bought 150 more boxes at a cost of $4 each, since the supplier’s price went up. According to the FIFO cost flow assumption, you use the cost of the beginning inventory and multiply the COGS by the amount of inventory sold. It’s important to …