Example of lifo, fifo and weighted average method, Cost Accounting

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Example of LIFO, FIFO and Weighted Average Method

Suppose the following purchases were made in ABC Ltd as like:

Date of purchase     Units purchased              Price/unit

1st January                   500                              100

2nd January                  600                              200

3rd January                   800                              400

Units used on date 4th January are 900. Find out the cost/value of units employed by using of FIFO, LIFO and weighted average.

Required: 

Find out the cost of units employed and the value of the closing stocks by utilizing LIFO and Weighted Average and FIFO.

Solution

1. FIFO

 

Cost of units used

 Date   

Units   

Unit price

Total cost

Jan 1

500     

100

 50,000

Jan 2

400

200

 80,000

 

900

Cost of units used

130,000

Closing stock is valued like:

 

Cost of units used

Date   

Units   

Unit price

Total cost

Jan 1

500     

100

 50,000

Jan 2

400

200

 80,000

 

900

Cost of units used

130,000

2. LIFO

 

Cost of units used

Date   

Units   

Unit price

Total cost

Jan 3

800     

400

 320,000

Jan 2

100

200

   20,000

 

900

Cost of units used

 340,000

                           Closing stock is valued as

Date   

Units   

Unit price

Total cost

Jan 2

   500  

200

 100,000

Jan 1

   500

100

   50,000

 

1,000

Value of closing stocks

 150,000

3. Weighted average

Date                Units                Unit price                    Total Cost of                Issues

0 - 0                900                  257.8                           232,105.20

Closing Stock Valuation = (Goods Available - Goods Issued) x Unit Price =

Unit Price = [500(100) + 600 (200) + 800 (400)]/1,900

=490,000/1,900

= 257.8


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