FIFO (First In - First Out) calculates inventory costing and is the most accurate calculating system because it accounts for cost fluctuations and usage patterns. The FIFO Plugin follows the FIFO method of cost accounting and shows the number of purchases, repacks, and sales and the estimated FIFO cost. For more information see Accounting system. FIFO, unlike auto-cost, is not a weighted average.
Additionally, FIFO deals with inventory valuation. Inventory valuation is the overall value of inventory based on layers and usages.
Items that are flagged as either billing codes or empties will be ignored by FIFO.
- On the Records>Product>Records it added a Fifo Panel.
- GL>Recompute FIFO Costs menu option.
- GL>FIFO Purchase-Cost Adjustments menu option.
FIFO breaks down all transactions in eoStar into Layers and Usages. Layers are transactions that bring product into the inventory, and Usages are transactions that deplete the inventory.
The cost of Kits cannot be calculated using FIFO. Instead, Kits require the manual cost to be used to display the true inventory valuation amount.
- Customer Returns
- Negative Write-offs
- Transfer-in from another warehouse (note: transfers to trucks belonging to the same warehouse have no FIFO impact)
- Customer Orders
- Purchase Returns to Supplier
- Transfer out to another warehouse (note: transfers to trucks belonging to a different warehouse are treated as a transfer to another warehouse)
- Negative Repack Adjustments
FIFO Cost Calculation
The cost of purchases and purchase returns are taken directly from the purchase lines in the system. The cost for all other transactions affected by FIFO are calculated. Since all costs are ultimately derived from the purchase of a product, no cost will be calculated if there are no purchases or only zero cost purchases on file.
To calculate the cost to be assigned to the transactions, eoStar computes a "daily usage" amount. The daily usage is calculated by totaling up the usages for the day, and depleting the layers from oldest to newest. The total value of the usages for that day is then divided by the total quantity of the usage to come up with the daily average usage. Then, all the transactions, except purchases and purchase returns, are updated with the same average usage cost for that day.
eoStar will attempt to account for inconsistent data by looking forward to the next available layer if all layers prior to the transaction for which it is calculating cost have been fully depleted.
In order to prevent some situations that showed some cases as $0.00 cost inventory on return layers (customer returns, reverse write-offs, and re-packs), the logic in eoStar was changed slightly. Now, the inventory is shown as available on the day of the return rather than the following day.
Zero Cost Items in FIFO
When an item's cost comes up as $0.00, the following steps are used to determine why the value is zero, and how to ensure that the proper price is added.
- Products coded as "Empty" will not be given a FIFO value.
- Products with no Purchase Order on file have nothing to base their FIFO cost on so you’ll need to add a zero qty purchase order using the cost you want for the products.
- Inventory>New Purchase.
- Select an Ordered Date prior to when you purchased the business.
- Quantity needs to be zero.
- Costs need to be accurate, list below of products and the associated auto/manual costs.
- Run this purchase through all the tracker queues.
- Next step is to update the FIFO costs.
- Go to GL>Recompute FIFO costs.
- Use the date range beginning with your conversion date through today, this will pick up the products that had their last purchase since you went live with eoStar.
Exclude Products from FIFO Calculation
A checkbox has been added to the Product record more panel that allows a product to be flagged as not to be used for FIFO calculation. This means that transactions for this product will instead pull their cost from the Auto or manual cost.