2 September 2025
FIFO vs Weighted Average for Mixed-SKU Product Lines
How Taiwanese distributors choose between FIFO and weighted average when purchase prices swing.
Distributors importing components with volatile freight and currency costs often debate FIFO against weighted average. Neither method is automatically “more accurate”; each answers a different question about matching costs to sales.
FIFO tracks older purchase layers out first. In rising-cost periods it can leave higher-cost layers in ending inventory, which lenders sometimes prefer to see explained. Weighted average smooths layers into a single unit cost, which is simpler for high-churn SKUs with frequent receipts.
Mixed-SKU catalogs complicate both. If fasteners move daily but specialty modules sit for months, a single plant-wide method may still apply, yet sampling for valuation testing should weight the slow movers differently.
Before changing method, document the reason, the SKUs affected, and how opening balances will be restated for internal comparison. External auditors and tax advisors in Taiwan will expect that paper trail when the next inventory valuation audit begins.