When using the FIFO (First-In, First-Out) method to restock food inventory, which of the following best describes the process?

• A. Inventory is restocked randomly, without regard to purchase date.
• B. The newest inventory items are sold or used first, and new stock is placed in front of existing stock.
• C. All inventory items are averaged together, and cost is assigned based on the average price.
• D. The oldest inventory items are sold or used first, and new stock is placed behind existing stock.

Answer: (D)

Verified step by step guidance

1. Understand the FIFO (First-In, First-Out) inventory method: FIFO assumes that the oldest inventory items (those purchased or produced first) are sold or used first, ensuring that inventory is rotated efficiently.
2. Recognize the physical flow of inventory under FIFO: When restocking inventory, new stock is placed behind existing stock to ensure that older items are used or sold first, preventing spoilage or obsolescence.
3. Compare FIFO to other inventory methods: Unlike FIFO, methods like LIFO (Last-In, First-Out) prioritize the newest inventory for sale or use, and the Average Cost method assigns a cost based on the average price of all inventory items.
4. Apply FIFO in practical scenarios: For food inventory, FIFO is particularly useful because it minimizes waste by ensuring that older items are used before they expire.
5. Reinforce the correct answer: The FIFO method involves selling or using the oldest inventory items first, while new stock is placed behind existing stock to maintain proper inventory rotation.