It is important to rotate stock in all areas: retail display area, warehouse, factory, etc. The reason to rotate stock is to reduce the losses from deterioration and obsolescence.
Ideally, when a company rotates its stock the units are physically flowing first-in, first-out (FIFO). However, in the accounting for the cost of inventory and the cost of the goods sold, the company may use a cost flow assumption which is different from the flow of the physical units. For example, a U.S. company may use the last-in, first-out (LIFO) cost flow assumption even though it diligently rotates its stock of goods.
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