Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A. Actual Price Method In this method, the materials issued are priced at their actual cost and this involves identification of each lot purchased. This

image text in transcribed

A. Actual Price Method In this method, the materials issued are priced at their actual cost and this involves identification of each lot purchased. This method is suitable only in the case of materials purchased for a specific job. There are several methods frequently used under actual cost price method which will be discussed in details: (1) First In First Out (FIFO): First In First Out is also known as FIFO. Under this method, the pricing of issue is based on an assumption made that the oldest stock is issued first. Therefore at the time of issue, the rate pertaining to that will be applied until the whole lots is exhausted. (1) it is simple and easy to adaptability. (2) It is beneficial when the prices are falling. (3) As actual prices are issued, it reflects on profit no loss in the pricing (4) This method is very useful for slow moving materials. S? (1) Calculation becomes complicated due to fluctuation of material prices. (2) More chances of clerical errors due to complicated calculations. (3) Under fluctuating prices, one requisition involves more than one price. (4) In times of raising prices this method tends to show the production at low cost since the cost of replacing the material will be higher Illustration: 1 From the following particulars, prepare the Stores Ledger Account showing how the value of the issues would be recorded under FIFO methods. 01.12.2003 Opening Stock 1,000 Units at Rs. 26 each 05.12.2003 Purchased 500 Units at Rs. 24.50 each 07.12.2003 Issued 750 Units 10.12.2003 Purchased 1,500 Units at Rs. 24 each 12.12.2003 Issued 1,100 Units 15.12.2003 Purchased 1,000 Units at Rs. 25 each 17.12.2003 Issued 500 Units 18.12.2003 Issued 300 Units 25.12.2003 Purchased 1,500 Units at Rs. 26 each 29.12.2003 Issued 1,500 Units

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Core Concepts Of Accounting

Authors: Leslie K. Breitner, Robert N. Anthony

10th Edition

0136029442, 9780136029441

More Books

Students also viewed these Accounting questions

Question

characteristics of blockchaiblockchain technology

Answered: 1 week ago