Whereas, if 260 items having highest cost are selected, then the cost of goods sold would be Rs. 7100 (150*30) + (100~24) + (10*20)]. 6. Simple average Price (SAP) r38 This is the average of prices of different lots of purchase. Under this method no consideration is given to the quantity of purchases in 3 various lots. For example the purchases of 500 units of materials at Rs. 10 per unit are made as on 5th January, 1995 and 800 units of materials at Rs. 14 per unit on 10th January. If at the end 200 units remains unissued/unsold, these will be valued at Rs. 12 - (10 + 14)/2]per unit and hence, the closing inventory will be shown at Rs. 2400 (200 * 12 - 2400). In fact, this method operated on the principle that when items of materials are purchased in big lots and are put in godown, their identity is lost and, therefore, issues should be priced at the average price of the lots in godown. 7. Weighted Average Price (WAP) Under this method, the quantity of material purchased in various lots of purchases is considered as weight while pricing the materials. Weighted average price is calculated by dividing the total cost of material in stock by the total quantity of material at the end. When this method is adopted, the question of profit or loss out of varying prices does not arise because it evens out the effect of widely fluctuating prices of different lots of purchases. This method is very popular because it reduces calculations and is based on quantity and value of material purchased. Illustration: The following are the details of transactions regarding receipt and issue of materials: Date Quantity received Rate Quantity issued 100 Rs. 1.00 Rs. 1.20 150 Jan.2, 2006 Jan 9, 2006 Jan. 14, 2006 Jan 17, 2006 Jan. 19, 2006 125 250 Rs, 1.30 100 You are required to prepare a stock ledger pricing the issue at fi) Simple average price and (in) Weighted average price