Cost Price Principle: FIFO

With FIFO (First In, First Out), cost prices are calculated based on the actual purchase prices—where the oldest items leave inventory first. This gives you a more accurate view of product consumption and profit margins, especially when purchase prices fluctuate.

FIFO is a great choice if you want more precision in your calculations and want to follow changes in cost prices more closely. However, the method requires more structure and data discipline in your stock movements to get the most out of the principle.

FIFO calculates inventory value based on the idea that the first items purchased are also the first items sold

With Cost Price Principle: Average Cost, your inventory value is calculated based on the average purchase price of the items you’ve bought. If you choose FIFO (First In, First Out) instead, your inventory value is calculated based on the principle that your first purchased items are also the first to be sold.

We recommend speaking with an accountant or bookkeeper before setting up your Rackbeat account. You need to choose a cost price principle during the initial setup of your Rackbeat agreement—and it cannot be changed afterwards.

If you want to use Cost Price Principle: FIFO, you’ll need our Premium subscription. You’re always welcome to talk to one of our product specialists if you’d like to learn more about the two cost price principles.