Let's execute the business flow with Real Price as the costing method for the product internal category:
| Seq. | Cost Price of Product | (Sale / Purchase) | Inventory Valuation | Cost Price of Product (after Operation) |
| 1 | 60 | 100 quantity at the rate of 70 | 7,000 100 qty * rate @ 70 | 60 |
| 2 | 60 | 100 quantity at the rate of 75 | 14,500 100 qty * rate @ 70 100 qty * rate @ 75 | 60 |
| 3 | 60 | 100 quantity at the rate of 65 | 21,000 100 qty * rate @ 70 100 qty * rate @ 75 100 qty * rate @ 65 | 60 |
| 4 | 60 | Sale of a quantity of 150 of material | 10,250 50 qty * rate @ 75 100 qty * rate @ 65 | 71.67 (it is the rate at which the quantity of 150 is sold out) |
There were three different lots of Material that arrived at three different prices-- 70, 75, and 65. The delivery for the sales order will be done based on the FIFO removal strategy, which means the lot purchased at the price of 70 will be out, and the remaining quantity of 50 will be assigned from the second lot, which was bought at the rate of 75:
Cost price (71.67) = (7000 + 3750) / (100 + 50)
The new cost price that will be set for the product is 71.67. It is the cost price computed based on the last lot of products removed from the Warehouse and not based on the products available in the Warehouse.
