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Whenever i am in doubt related to such topics, i scroll in youtube go through many videos and finally come back to your videos and then i dont need anymore videos. Thanks for such wonderful explanation.
4 years later after I have my degree do I see this video lol (graduated in 2017). This video is FANTASTIC. It's a simple concept but you made it so much more simpler and easier to understand.
It's good to have a refresher once in a while! 😉 I made a couple of videos in this series, around LIFO as well.... ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-RAj94EUmm6g.html
That is great to hear, Nazira! I have a related video on LIFO as well, in case that is covered in your exam: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-Tq4oZA_npWM.html
Happy to hear that! I have a follow-up video on LIFO as well: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-Tq4oZA_npWM.html plus some more videos around inventory and COGS.
Go back to the start of the video: at ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-RAj94EUmm6g.html I explain that the company is buying the units at ever increasing prices in January, February and March. When they have 2400 units in stock at the end of March, the average inventory value is $6. Once you sell 50 units, that according to the FIFO method are assumed to come from the purchases made in January at $5 per unit, then as a result your average value per unit of the remaining inventory goes up. You now have less of the "cheap" inventory left, and (relatively) more of the "expensive" stuff.
Sorry to hear that.... Maybe you can start with watching the video on COGS (the "offset" to inventory, and the main reason we bother with this stuff in the first place) ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-jEUnCe_9I-s.html and/or the one contrasting FIFO and LIFO ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-VickgxlajOM.html
In April, you start off with 400 units valued at $2400, so the average value per unit $2400 / 400 = $6. During April, you have sold 50 units, which you assume (using FIFO First In First Out) have come out of the oldest stock, i.e. they are January purchases where you paid $5 per unit. At the end of April, you have 400 - 50 = 350 units left. As you put 50 units at a total value of $250 into COGS, your remaining inventory value is $2400 - $250 = $2150. Divide the inventory value by the number of units: $2150 / 350 = $6.14 per unit.
If the company wants to make a positive profit margin, then it has to sell the product at a higher price than the cost per unit. I took $10 per unit for illustration purposes, I could have taken $8 per unit and achieved lower margins, or $15 per unit and achieved much higher margins. See also the video on margin vs markup ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-rD-l7kO4-F4.html
