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 4^th 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

Closing stock is valued like:

2. LIFO

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