First in first out or fifo, Cost Accounting

First in First Out or FIFO

FIFO method is based upon the assumption such stock purchased first is issued first. Prices of stock purchased first are employed to determine the value or cost of inventory issued.  Closing stocks are carried on the latest costs.

Advantages

1. This is a realistic system: as oldest items are generally issued first out.

2. Unrealized losses or profits do not happen

3. This is easy to calculate whether prices of materials don't fluctuate

4. Such closing stocks values reflect the latest costs hence tend to reflect the recent market values.

5. This is acceptable to many tax authorities and is consistent also along with accounting practices as like IAS/IFRS.

Disadvantages

1. It includes tedious calculations whether the price of materials fluctuate from time to time

2. The product costs, based upon the oldest material prices, lag behind recent conditions especially into inflationary markets. 

3. Comparison about one job along with another may be difficult whether materials are issued on various prices.

Posted Date: 2/5/2013 5:24:35 AM | Location : United States







Related Discussions:- First in first out or fifo, Assignment Help, Ask Question on First in first out or fifo, Get Answer, Expert's Help, First in first out or fifo Discussions

Write discussion on First in first out or fifo
Your posts are moderated
Related Questions
How relevant to the decision are the $800(000) initial cost of the project and the operating losses of $300(000)? Calculate the incremental liquidation cash flows for the abando

Prepare the Material Cost Budget of products of a Company For a company along with many products, a periodic budget would be developed given as: Assume a firm has 3 products X

Stopover industries ltd, a recently incorporated company plans to go into production next year. the following standard cost matrix has been assembled for one of the products it pro

Explanations on the correct fixation of selling price

given the following : Constant $21,800 Std.error of Y Est. 4,500 R squared 0.7832 Observations # 22 X coefficient 11.75 Std.error of Coef.

The Pacific Manufacturing Company operates a job-order costing system and applies overhead cost to jobs on the basis of direct labor cost. Its predetermined overhead rate was based

Methods of Work in Progress The two main methods used for purposes of valuing the opening work in progress: 1. Weighted Average Method 2. FIFO or First In First out Meth

Special order pricing - Shorewood Shoes Company makes and sells a variety of leather shoes for children. For its current mix of different models and seizes, the average selling pri

costing in respect of mathematical accounting a research project.