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First-in First-out Method (FIFO)
A technique of inventory valuation based on the concept that merchandise is sold in the order of its acknowledgment. In other words, if an electronics store buys 100 stereos in January and 50 in February, FIFO assumes that the units' buys in January will be sold before the units buys in February. When inventory is valued with FIFO, cost of products sold is totally based on the cost of older inventory.
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