First In, First Out

With the first in, first out (FIFO) costing method, TireMaster uses the cost of the first item received as the next cost of the item.

For example, if you receive a tire in January at a cost of $50 and tire in February at a cost of $60, the next cost of the item will be $50—the cost of the tire that was in TireMaster first. The next time you sell one of those tires, a $50 cost posts to the general ledger and it is used to calculate the value of the tire.