(iv) receipts. As it is based on historical cost, no unrealised profit enters into the financial statements for the period. 837 Disadvantages: This method suffers from the following limitations: (i) Because of violent changes in prices of materials, it involves somewhat complicated calculations and therefore, it involves somewhat complicated calculations and, therefore, increase the changes of clerical errors. (ii) The prices of issues of materials may not reflect current market prices and, therefore, during the period of inflation, the charge to production is unreasonably low. (iii) Comparison between different jobs executed by the firm becomes sometimes difficult. A job commenced a few minutes before another job might have consumes the supply of lower priced stock. This is particularly because of that the fact the first job might have completely exhausted the supply of materials of a particular lot. Suitability FIFO method is considered more suitable during the periods of falling prices. The reason is that the higher price at which the purchase of materials was made earlier stands recovered in cost. This method is suitable when the size of purchases is large but not much frequent. The moderate fluctuations in the prices of materials, and easy comparison between different jobs are also the important conditions for the use of this method. Illustration: The following is the record of receipts of certain materials during the month of January 2006: Jan. 2 Received 500 Units @ Rs. 20 per unit Jan. 3 Received 400 Units Jan. 15 Received 300 Units @ Rs. 21 per unit @ Rs. 19 per unit @ Rs. 20 per unit Jan. 28 Received 400 Units The physical inventory taken on 31 January, 2006 shows that there are 600 units in hand. Compute the inventory value on 31st January, 2006 by FIFO method