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FIFO method:

According to the first-in-first-out (FIFO) inventory valuation method, it’s assumed that inventory

items are sold in the order in which they’re manufactured or purchased. In other words, the

oldest inventory items are sold first. The FIFO method is widely used because companies

typically sell products in the order in which they’re purchased, so it best represents the actual

flow of goods in a business.

FIFO method example:

Let’s say a business bought shirts on two separate occasions at two different prices during a

month:

100 shirts at $10

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