If you are looking for powerful inventory software that’s easy to use, and provides you visibility to your COGS and margins, then try InFlow inventory management software for free: inflow.grsm.io/FIFO
Whenever i am in doubt related to such topics, i scroll in youtube go through many videos and finally come back to your videos and then i dont need anymore videos. Thanks for such wonderful explanation.
4 years later after I have my degree do I see this video lol (graduated in 2017). This video is FANTASTIC. It's a simple concept but you made it so much more simpler and easier to understand.
It's good to have a refresher once in a while! 😉 I made a couple of videos in this series, around LIFO as well.... ua-cam.com/video/RAj94EUmm6g/v-deo.html
Go back to the start of the video: at ua-cam.com/video/RAj94EUmm6g/v-deo.html I explain that the company is buying the units at ever increasing prices in January, February and March. When they have 2400 units in stock at the end of March, the average inventory value is $6. Once you sell 50 units, that according to the FIFO method are assumed to come from the purchases made in January at $5 per unit, then as a result your average value per unit of the remaining inventory goes up. You now have less of the "cheap" inventory left, and (relatively) more of the "expensive" stuff.
Wishing you lots of success! Well done in looking for additional explanations on UA-cam. I cover LIFO as well in this video: ua-cam.com/video/Tq4oZA_npWM/v-deo.html&pp=gAQBiAQB
If the company wants to make a positive profit margin, then it has to sell the product at a higher price than the cost per unit. I took $10 per unit for illustration purposes, I could have taken $8 per unit and achieved lower margins, or $15 per unit and achieved much higher margins. See also the video on margin vs markup ua-cam.com/video/rD-l7kO4-F4/v-deo.html
In April, you start off with 400 units valued at $2400, so the average value per unit $2400 / 400 = $6. During April, you have sold 50 units, which you assume (using FIFO First In First Out) have come out of the oldest stock, i.e. they are January purchases where you paid $5 per unit. At the end of April, you have 400 - 50 = 350 units left. As you put 50 units at a total value of $250 into COGS, your remaining inventory value is $2400 - $250 = $2150. Divide the inventory value by the number of units: $2150 / 350 = $6.14 per unit.
Sorry to hear that.... Maybe you can start with watching the video on COGS (the "offset" to inventory, and the main reason we bother with this stuff in the first place) ua-cam.com/video/jEUnCe_9I-s/v-deo.html and/or the one contrasting FIFO and LIFO ua-cam.com/video/VickgxlajOM/v-deo.html
If you are looking for powerful inventory software that’s easy to use, and provides you visibility to your COGS and margins, then try InFlow inventory management software for free: inflow.grsm.io/FIFO
Whenever i am in doubt related to such topics, i scroll in youtube go through many videos and finally come back to your videos and then i dont need anymore videos. Thanks for such wonderful explanation.
Thank you for the kind words, Prakash! I am delighted to hear that. :-)
4 years later after I have my degree do I see this video lol (graduated in 2017). This video is FANTASTIC. It's a simple concept but you made it so much more simpler and easier to understand.
It's good to have a refresher once in a while! 😉 I made a couple of videos in this series, around LIFO as well.... ua-cam.com/video/RAj94EUmm6g/v-deo.html
thank you for this simplified example! All the accounting videos i watch are usually so complicated. You make it easier to understand.
Nice to hear that! I will be posting videos on LIFO accounting, and a FIFO vs LIFO comparison, in the next few days.
Great explanation! You made it so easy to understand- thank you!!!
Wonderful to hear that! Have you watched the related video on LIFO as well? ua-cam.com/video/Tq4oZA_npWM/v-deo.html
Thank you very much, after watching your video, I could fully understand the FIFO cost formula and manage my exam exercises🙏❤
That is great to hear, Nazira! I have a related video on LIFO as well, in case that is covered in your exam: ua-cam.com/video/Tq4oZA_npWM/v-deo.html
Thank you for this video, it really helped me out with my studies.
Happy to hear that! I have a follow-up video on LIFO as well: ua-cam.com/video/Tq4oZA_npWM/v-deo.html plus some more videos around inventory and COGS.
2:45 why is the total value per unit (average) $6.14 here and not 6.00.like before? The values didn't change
Go back to the start of the video: at ua-cam.com/video/RAj94EUmm6g/v-deo.html I explain that the company is buying the units at ever increasing prices in January, February and March. When they have 2400 units in stock at the end of March, the average inventory value is $6. Once you sell 50 units, that according to the FIFO method are assumed to come from the purchases made in January at $5 per unit, then as a result your average value per unit of the remaining inventory goes up. You now have less of the "cheap" inventory left, and (relatively) more of the "expensive" stuff.
I'm so sorry, I still don't understand how you got the $6.14...@@TheFinanceStoryteller
Thanks man 😮😮
Happy to help
Im currently taking a financial accounting course, yarb A.
Wishing you lots of success! Well done in looking for additional explanations on UA-cam. I cover LIFO as well in this video: ua-cam.com/video/Tq4oZA_npWM/v-deo.html&pp=gAQBiAQB
Thank you brother!
My pleasure! I have a related video on LIFO as well: ua-cam.com/video/Tq4oZA_npWM/v-deo.html
Already did✊
Great! Then please subscribe to the channel, and spread the word to friends and colleagues! 😎
I wanna ask about why the revenue is 50*$10. I get why it's 50 but the $10?. Is it price per unit?
Correct! 50 units sold at $10 per unit is $500 in revenue in total in April.
4:15 how comes you're selling it at $10 per unit?
If the company wants to make a positive profit margin, then it has to sell the product at a higher price than the cost per unit. I took $10 per unit for illustration purposes, I could have taken $8 per unit and achieved lower margins, or $15 per unit and achieved much higher margins. See also the video on margin vs markup ua-cam.com/video/rD-l7kO4-F4/v-deo.html
@@TheFinanceStoryteller whoa this helps. Thanks! I completely understand it now, and I appreciate your response even after 2 yrs
@@swisdom9117 , I was also confused about where he got the $10. It would be helpful if it was explained. 🙂
Thank you!
You're welcome! :-)
How do you get the average after you subtract the 50 sold
In April, you start off with 400 units valued at $2400, so the average value per unit $2400 / 400 = $6. During April, you have sold 50 units, which you assume (using FIFO First In First Out) have come out of the oldest stock, i.e. they are January purchases where you paid $5 per unit. At the end of April, you have 400 - 50 = 350 units left. As you put 50 units at a total value of $250 into COGS, your remaining inventory value is $2400 - $250 = $2150. Divide the inventory value by the number of units: $2150 / 350 = $6.14 per unit.
I love you💕😍
Thank you for watching and commenting. Sending you a big hug back.
Argh I still don't understand. I'm gonna regroup and try again
Sorry to hear that.... Maybe you can start with watching the video on COGS (the "offset" to inventory, and the main reason we bother with this stuff in the first place) ua-cam.com/video/jEUnCe_9I-s/v-deo.html and/or the one contrasting FIFO and LIFO ua-cam.com/video/VickgxlajOM/v-deo.html
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