Page 101 - DCOM202_COST_ACCOUNTING_I

Unit 5: Methods of Valuing Material Issues

Notes
Example: prepare the stores ledger account based on the weighted average method of
pricing issues from the following informations:
July 2008,

2 Opening balance 24,000 kgs @ ` 7,500 per tonne
2 Purchase 44,000 kgs @ ` 7,600 per tonne
2 Issue 10,000 kgs
4 Issue 1 6,000 kgs
10 Issue 24,000 kgs

11 Purchase 10,000 kgs @ ` 7,800 per tonne
16 Issue 24,000 kgs
20 Purchase 50,000 kgs @ ` 8,000 per tonne
25 Issue 30,000 kgs
31 Issue 22,000 kgs

Solution:

Stores Ledger Account
date Receipts Issues Balance
Qty. Rate Amount Qty. Rate Amount Qty. Amount
Units (`) (`) Units (`) (`) Units (`)
July – – – – – – 24,000 1,80,000 (a)
2008, 2
2 44,000 7.60 3,34,440 – – 68,000 5,14,400
2 – – – 10,000 7.5647 (b) 75,647 58,000 4,38,753
4 – – – 16,000 7.5647 1,21,035 42,000 3,17,718
10 – – – 24,000 7.5647 1,81,553 18,000 1,36,165
11 10,000 7.80 78,000 – – – 28,000 2,14,165
16 – – – 24,000 7.64875 (c) 1,83,570 4,000 30,595
20 50,000 8.00 4,00,000 – – – 54,000 4,30,595
25 – – – 30,000 7.97398 (d) 2,39,219 24,000 1,91,376
31 – – – 22,000 7.974 1,75,428 2,000 15,948
Working notes:
(a) 24000 × 7.5
(b) 5,14,400 ÷ 68,000
(c) 2,14,165 ÷ 28,000
(d) 4,30,595 ÷ 54,000
(vii) Standard Price Method: “Standard Price is predetermined price fixed on the basis of a
specification of all the factors affecting that price”. Firms which follow standard costing
will record all the receipts and issues of materials at the standard price which will be fixed
in advance. In this case, both the receipts and issues will by costed at a standard rate. Hence
it is a predetermined price.

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