Guys, I need to talk to y’all about something important. Have y’all ever heard about FIFO vs Weighted Average? It’s a serious decision that affects the way we manage our inventory costs. Check out these images to understand better:
FIFO, or First In First Out, means that the oldest products in our inventory are the first ones sold or used in our business. It’s like a queue, y’all. And just like in a queue, the first one that arrives is also the first one that leaves. This method is useful when we want to avoid spoilage or expiration of products. We don’t want to keep old products that are no longer fresh, do we?
Weighted Average Method
Weighted Average, on the other hand, calculates the average cost of all products in our inventory. It’s like a balance, y’all. We add up the total cost of all our products and divide it by the number of products we have. This method usually results in a more constant cost per product, and it’s easier to manage. However, it doesn’t take into account the age or freshness of our products, so we need to be careful to avoid spoilage or expiration, y’all.
So, which method is better, y’all? Well, it really depends on our business and our needs. Both methods have their advantages and disadvantages. It’s important to study both methods carefully and choose the one that best fits our business needs, y’all. We don’t want to waste money or lose products because of a bad management decision, do we?
Let’s be honest, managing inventory costs may not be the most exciting thing to do, y’all. But it’s crucial to our business success, so let’s be smart and choose the right method for us. Keep these images in mind and study the methods carefully, y’all. We got this!
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