Page 99 - DCOM202_COST_ACCOUNTING_I

Unit 5: Methods of Valuing Material Issues

(c) As the issues are not priced at the actual costs, usually profit or loss will arise if this method Notes
is used.

Example: From the following particulars, prepare stores ledger account using (a) Simple
Average Method, and (b) FIFO Method of pricing issues.

January 2006,
2 purchased 400 units @ ` 40 per unit
4 purchased 500 units @ ` 50 per unit
6 Issued 200 units
7 purchased 600 units @ ` 60 per unit

10 Issued 400 units
15 Issued 100 units
18 Issued 200 units
24 purchased 450 units @ ` 55 per unit

31 Issued 250 units
Solution:
(a) Simple Average Method:

Stores Ledger Account
Receipts Issues Balance
date Rate Amount Rate Amount Rate Amount
Units Units Units
(`) (`) (`) (`) (`) (`)
2006
Jan., 2 400 40 16,000 – – – 400 40 16,000
4 500 50 25,000 – – – 400 40
500 50 41,000
6 – – – 200 45 9,000 200 40
500 50 32,000
7 600 60 36,000 – – – 200 40
500 50
600 60 68,000
10 – – – 200 50 10,,000
200 50 10,000 300 50
600 60 48,000
15 – – – 100 55 5,500 200 50
600 60 42,500
18 – – – 200 55 11,000 600 60 31,500
24 450 55 24,750 – – – 600 60
450 55 56,250
31 – – – 250 57.5 14,375 350 60
450 55 41,875

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