# What inventory system is adopted by Manager?

The same inventory item that my company purchases over a period of time differs in terms of price partly because of bulk discount and supplier increasing their selling price.

I’ve been wondering which inventory valuation does Manager use? Is it FIFO, LIFO or average weighted cost?

How does Manager calculate the profit/loss of an inventory item given the different purchase prices?

Manager is using weighted average method.

Here is an example of how purchases and sales affect average cost per item:

``````Day 1 - Beginning inventory 5 units @ \$500/unit = \$2,500
Day 1 - Purchase 20 units @ \$550/unit = \$11,000
Average cost = (\$2,500 + \$11,000)/25 = \$540/unit

Day 2 - Sales 21 units
Balance: 4 units @ \$540 = \$2,160

Day 3 - Purchase 6 units @ \$600/unit = \$3,600
Day 3 - Purchase 10 units @ \$620/unit = \$6,200
Average cost = (\$2,160 + \$3,600 + \$6,200)/20 = \$598/unit
``````

So basically average cost is re-calculated on every purchase.

I was wondering the same thing. Are the plans to make this more adaptable?

Weighted average method will be always the default valuation method for inventory. There are technical reasons behind this.

I might implement “what-if” report that can give you FIFO or LIFO figures as well which might be useful to see if different valuation method would give you more favorable tax treatment but that is just a report you would likely run only once a year.

Most businesses use average costing method, however, it would be an awesome idea if there’s an included option of FIFO; this would really give more edge to ‘Manager’, so that businesses can chose an option that best suite them. Currently, I have succeeded in convincing a client to purchase Manager Server Edition, I have shown them (and tested) all its functions and possibilities and they were really impressed, until they discovered it uses only Average Costing Method while their business is handled with FIFO Costing Method. Manager is an awesome app and I am still recommending it to businesses. My humble appeal is to include an option of FIFO alongside the existing Weighted Average. Thanks for the continuous great job!