Tiffany started a t-shirt company and she needs to inventory her remaining stock for the end of the year. How can she determine a value for her remaining shirts?
Tiffany will want an accurate year-end tally so that her inventory and costs are correct for the year. After she has physically counted the shirts she has on hand as of December 31, she has a few methods to choose from to determine their dollar value.
LIFO
Short for “last-in, first-out.” This implies that the remaining shirts are the oldest because the last ones she received were the first ones out the door when a customer made a purchase. Therefore, she assigns the oldest price to each shirt.
FIFO
The opposite of LIFO, “first-in, first-out” means that the inventory is sold in the order it was received. This means the newest shirts remain in stock at the more recent cost.
Specific Identification
This method groups pieces of inventory together based on when they were purchased, how much they cost and any additional costs that are incurred until sold.
Client Profile is based on a hypothetical situation. The solutions we discuss may or may not be appropriate for you.