The FIFO method of inventory valuation says that the inventory which came in first will be used first. Which sounds like a fairly logical and plausible situation. And best suited for raw materials that do not have a long shelf life. Hence the inventory which comes in first will be used or resold first. So, if we have 4 different inventory prices at say USD 1, USD 1.3, USD 1.9 and USD 2, and the company follows the FIFO method, then the US$ 1 inventory will be used up first and so on.