The FIFO (First-In, First-Out) valuation method is based on the principle that the first units to enter the warehouse are the first ones to be issued or sold. When a goods issue transaction is posted for an item managed by FIFO, SAP Business One automatically identifies and consumes the oldest open inventory layer. The cost of the items in this oldest layer is used to calculate the cost of goods sold for the transaction. This process is automated by the system to ensure chronological consumption of inventory costs.

A. The layer selected by a user: The FIFO process is automated by the system based on the layer's age; manual user selection is not the standard procedure.

C. The layer with the lowest cost: Cost is not the determining factor for layer selection in FIFO; the chronological order of receipt is the sole criterion.

D. The layer with the smallest quantity: The quantity of items in a layer has no influence on the selection logic for the FIFO valuation method.

---

1. SAP Business One 10.0

TB1200 Logistics

Unit 4: Inventory.

Reference: In the section on "Inventory Valuation Methods

" the FIFO method is described. It explicitly states that when a goods issue is created

the system uses the price from the first open goods receipt layer. The "first" layer corresponds to the "oldest" layer chronologically.

2. SAP Help Portal for SAP Business One.

Reference: In the documentation for "Working with a Perpetual Inventory System

" under the topic "Inventory Valuation Methods

" the FIFO method is detailed. The guide explains: "When you sell or use items

the system uses the prices of the items from the first open layers for the cost of goods sold calculation." This confirms the system automatically chooses the oldest layer. (Path: Help.sap.com -> SAP Business One -> [Version] -> Application Help -> Modules -> Inventory -> Perpetual Inventory System).