FIFO, LIFO, AVERAGE, METODE PERPETUAL | UD. SAYANG KAMU #fifoperpetual

Introduction

This tutorial provides a comprehensive guide to calculating ending inventory, cost of goods sold (HPP), and gross profit using the FIFO (First In, First Out) perpetual inventory method. Understanding these concepts is essential for effective inventory management and financial reporting in businesses.

Step 1: Understand FIFO Method

• FIFO assumes that the oldest inventory items are sold first.
• It is important for businesses to value their inventory correctly to reflect true costs.
• The FIFO method can result in lower cost of goods sold during times of rising prices.

Practical Tip

• Familiarize yourself with the specific inventory items and their purchase costs to effectively apply FIFO.

Step 2: Calculate the Cost of Goods Sold (HPP)

1. Identify Inventory Purchases: Gather all purchase records including quantity and cost of each batch.
2. Track Sales: Record each sale with the quantity sold.
3. Apply FIFO:
   • Start with the oldest inventory when calculating COGS.
   • Deduct from inventory until the sale quantity is met.
4. Calculate HPP:
   • Use the formula:

     HPP = (Cost of oldest inventory sold) + (Cost of next oldest inventory sold) + ...
     

   • Continue until you've accounted for the entire quantity sold.

Common Pitfall

• Ensure accurate tracking of inventory quantities to avoid discrepancies in HPP calculations.

Step 3: Determine Ending Inventory

1. Total Inventory Calculation:
   • List remaining inventory after sales.
   • Calculate total value based on the costs of the remaining items.
2. Apply FIFO:
   • The remaining inventory will consist of the newest purchases.

Example Calculation

• Suppose you purchased 100 units at $10 each and 150 units at $12 each.
• If you sold 120 units:
  • 100 units at $10 (oldest) = $1000
  • 20 units at $12 (next oldest) = $240
• HPP = $1240
• Remaining inventory = 130 units (130 units at $12 = $1560).

Step 4: Calculate Gross Profit

1. Determine Sales Revenue:
   • Calculate total sales revenue from sold inventory.
2. Use the Formula:

   Gross Profit = Sales Revenue - HPP
   

Practical Tip

• Regularly review gross profit margins to assess product viability and pricing strategies.

Conclusion

Using the FIFO perpetual method allows businesses to maintain accurate inventory records while reflecting true costs in financial statements. By understanding and applying these steps, you can effectively manage inventory, calculate HPP, and determine gross profit. For further learning, consider exploring LIFO and Average methods as well, as they provide alternative approaches to inventory accounting.