In order to run any retail business properly, business owners need to know the cost of their inventory for:

• Big tax deductions
• Improving ordering strategies.

Calculating your inventory cost can be done in several ways, but one of the most common methods is called FIFO, which stands for “first in, first out”. This method differs from LIFO (“last in, first out”) and average cost, two other methods that the IRS also accepts for inventory cost reporting.