Item Code AB1234 is controlled by the FIFO valuation method. When this item is issued out of the warehouse, which layer does the system choose first?

Question

Options

• AThe layer selected by a user
• BThe oldest available layer
• CThe layer with the lowest cost
• DThe layer with the smallest quantity

• A
  5% (2)
• B
  72% (31)
• C
  7% (3)
• D
  16% (7)

Explanation

FIFO (First In, First Out) means inventory received earliest is issued first, so the system automatically selects the oldest available layer (B) - no user input or cost comparison is involved.

Why the distractors are wrong:

• A is wrong because FIFO is an automated valuation rule; the system picks the layer, not a user.
• C describes LIFO (Last In, First Out) or a lowest-cost method - neither is FIFO.
• D describes no standard costing method; quantity size has nothing to do with issue order.

Memory tip: Think of FIFO like a grocery store shelf - staff stock new milk behind the old milk, so customers always grab the oldest carton first. "First in" (oldest stock) = "first out" (issued first).

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