What is FIFO valuation procedure in SAP MM-IM - Inventory Management?

SAP Term: FIFO valuation procedure

• Component: MM-IM

• Component Name: Inventory Management

• Description: The abbreviation for “first in, first out.” An approach that allows the realistic valuation of stocks inventories of a material. The FIFO valuation procedure is based on the assumption that the materials that are acquired first are also those that are consumed first. The value of the stock is therefore calculated based on the last stocks received.

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• Key Concepts: 
  FIFO (First In, First Out) valuation procedure is a method of inventory valuation used in SAP MM-IM Inventory Management. It is based on the assumption that the oldest items in inventory are the first to be sold or used. This method is used to determine the cost of goods sold and the value of inventory on hand. 
  
  How to use it: 
  In SAP MM-IM Inventory Management, FIFO valuation procedure is used to calculate the cost of goods sold and the value of inventory on hand. The system will automatically calculate the cost of goods sold based on the oldest items in inventory. The system will also calculate the value of inventory on hand by subtracting the cost of goods sold from the total value of inventory. 
  
  Tips & Tricks: 
  When using FIFO valuation procedure, it is important to ensure that all items in inventory are accurately tracked and accounted for. This will ensure that the system calculates accurate costs and values for each item in inventory. Additionally, it is important to regularly review and update inventory records to ensure accuracy. 
  
  Related Information: 
  FIFO valuation procedure is one of several methods used for inventory valuation in SAP MM-IM Inventory Management. Other methods include LIFO (Last In, First Out) and Average Cost methods. It is important to understand the differences between these methods in order to select the most appropriate one for your business needs.