Step-by-Step Practical FIFO Issuance Example
Consider a warehouse stocking industrial epoxy resin:
- Receipt 1 (October 1): 100 kg received at ₹400/kg (Batch A-101).
- Receipt 2 (October 10): 150 kg received at ₹420/kg (Batch A-102).
On October 15, a production work order requisitions 120 kg of resin. Under strict FIFO rules, the warehouse issues:
- 100 kg from Batch A-101 (exhausting the October 1 receipt completely).
- 20 kg from Batch A-102 (drawn from the October 10 receipt).
- Remaining closing stock = 130 kg of Batch A-102.
Core Operational Advantages of FIFO
- Prevents Shelf-Life Expiry & Oxidation: Crucial for paints, coatings, sealants, and raw metals prone to atmospheric oxidation.
- Guarantees Full Batch Traceability: When customer warranty claims occur, FIFO links the finished unit directly back to the specific raw material heat number.
- Realistic Cost of Goods Sold (COGS): Prevents inventory valuation distortions caused by fluctuating commodity prices.
Production & Plant Control
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