What is FIFO (First In, First Out)?

FIFO is an inventory valuation method that costs the oldest purchased products first. Yet most e-commerce accountants recommend Weighted Average Cost (WAC) instead.

Formula

COGS = Oldest Inventory Cost × Quantity Sold

Example

If you bought 100 units at $10 in January, 100 at $12 in February, and sold 120, FIFO COGS = (100 × $10) + (20 × $12) = $1,240. With WAC: 120 × $11 = $1,320.

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Related Terms

COGS (Cost of Goods Sold)

COGS is the direct cost of products sold: purchase price + inbound shipping + duties. The landed cost is the number you actually need to know.

Gross Margin

Gross margin is the difference between revenue and COGS, as a percentage. With the median e-commerce net profit at 3%, this number determines viability.

Markup

Markup shows how much more you sell a product for compared to its cost, as a percentage. It is not the same as margin — confusing the two is one of the most common mistakes.

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What is FIFO (First In, First Out)? | Margyn Glossary