First in first out or fifo, Cost Accounting

Assignment Help:

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.


Related Discussions:- First in first out or fifo

#title., how does idle capacity effect cost behavior patterns and factory o...

how does idle capacity effect cost behavior patterns and factory overhead application methods

Cost data determination, Cost Data Determination How does one decide th...

Cost Data Determination How does one decide the cost data for products and the services which are the end result of the productive processes? The response to this question is m

Calculate the group profit and loss, Using the chosen company from Bursa Ma...

Using the chosen company from Bursa Malaysia, prepare a consolidated accounts assuming that the chosen company acquire Sure Cargo Behard at 80% of its ordinary shares. Given bel

Giardia, Place a prepared slide of Giardia first under tlie low power and t...

Place a prepared slide of Giardia first under tlie low power and then under the high power of the microscope and observe tlie followilig characters. i) Bilaterally symmetrical

Cost account ledger system, Cost Account Ledger System A cost account ...

Cost Account Ledger System A cost account ledger system is essential to analyze accounting information in order such costs may be accumulated for individual cost centers and c

Usefulness of variance analysis, Usefulness of Variance Analysis Caref...

Usefulness of Variance Analysis Carefully note that while prices are being charged to production, it can be done at the actual or standard price. For purposes of making varian

Cost components, Cost Components Companies which manufacture a product ...

Cost Components Companies which manufacture a product face an elaborated set of accounting issues. Additionally the usual accounting matters related with selling and administra

An impact on the breakeven, We've all experienced (or heard about) the chal...

We've all experienced (or heard about) the challenges that the airlines have been facing. Read the Zacks Investment Research article, "Airline Industry Stock Outlook - August 2012"

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd