example of lifo fifo and weighted average method

Question

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

	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