How Does Sage 50 Handle Costing for Inventory?

FIFO (First-In, First-Out) - This method assumes that the first unit put into inventory is the first unit sold.

LIFO (Last-In, First-Out) - This method assumes that the last unit put into inventory is the first unit sold.

Average- This method uses a weighted average of the cost of the items to determine the value of inventory and cost of goods sold.

Specific Unit - This method is only used for serialized items. The specific cost of the item is known because the items are assigned serial numbers when they are put into inventory which allows you to know the exact cost of the serialized items that you have in inventory or are selling. You must use specific unit costing for your serialized items.

Let's say you sell pens. Last week, you bought 20 pens for $1 each. This week, you bought 40 more pens for $1.50 each. Today you sell 25 pens.

FIFO - cost of goods sold would be $27.50 [(20 x $1) + (5 x $1.50)], value of pens remaining in inventory would be $52.50 (35 x $1.50)

LIFO - cost of goods sold would be $37.50 (25 x $1.50), value of pens remaining in inventory would be $42.50 [(15 x $1.50) + (20 x $1)]

Average - average cost would be $1.33 [(20 x $1) + (40 x $1.50)]/60, cost of goods sold would be $33.25 (25 x $1.33), value of pens remaining in inventory would be $46.55 (35 x $1.33)