COST ACCOUNTING-MATERIAL COSTING: TOPICS: - FIFO - LIFO - SIMPLE AVERAGE - WEIGHTED AVERAGE

We are going into practical directly-you can read theory on the following topics on your own:

TOPICS:

-      FIFO

-      LIFO

-      SIMPLE AVERAGE

-      WEIGHTED AVERAGE

QUESTION:

Onoriode Limited has the following transactions during April:

Opening Stock		40units	@N10 each
April 4	Bought	140 units	@N11 each
April 10	Used	90 units
April 12	Bought	60 units	@N12 each
April 13	Used	100 units
April 16	Bought	200 units	@N10 each
April 21	Used	70 units
April 23	Used	80 units
April 26	Bought	50 units	@N12 each
April 29	Used	60 units

Note: We you see bought, that means we have purchase goods.  Be it raw materials or finished goods.  Likewise, when you see used, it means we have sold or we have given out goods to customers.

We are solving now using FIFO, which means first come, first out.  It means that the goods that we have first according to the date, it is the one that will be sold first or given out first. In this case, we have Opening Stock (40 units @N10 each) as the first goods in our store or warehouse.  Followed by April 4 where we bought (140 units @N11 each).  Also note that opening stock may not have that but it our remaining goods in store or warehouse. So it has to be sold first or given out first as FIFO stated.  

SOLUTION/WORKINGS USING FIFO:

Our workings will be with diagrams/arrows to spoon feed you.  TABLE 1

Receipt or Bought				Issues or Sold			Balance
Date	Qty	Unit price (N)	Total price (N)	Qty	Unit price (N)	Total Price (N)	Total Qty	Total Balance (N)
Bal b/d	40	10	400	-	-	-	40	400
April 4	140	11	1540	-	-	-	180	1940

Please, always refer to the Question table to know how we solved the solution table. E.g. The 40, 10, 400 in the bal b/d row in the solution table was brought from the question.  It is the opening Stock and we multiple 40 x 10 =400.  While in April 4 row, we also brought it from the question table as the next goods we bought after the opening stocks.  In this case 140 x 11 gives you 1540.  Our arrows and diagram has shown how we can solve in FIFO when we purchase goods, how we can multiply and add to get our totals in quantity and totals in Naira.

The next step is how to solve the question using FIFO to sell or issue out goods.  We will show the diagrams/arrows once more then we will go now show a complete solved table which we believe you will definitely understand how they were solved.

 Now in selling or issued, we are reducing the stock we have in our store or warehouse. Thus, the balance will reduce both total quantity and total balance.  In April 10, we Sold 90 quantity & FIFO state that we must finish the first goods before we proceed to the next one. And in this case we have 40 as the first, so we have to give it out at its price (N10), then we will be left with 50, which we took from 140 above at N11. Here is the diagram/arrow

Note: that when we are buying, the columns & rows of issues will not have any figure. It is when we sold that you can now see figure on it. 

Receipt or Bought				Issues or Sold			Balance
Date	Qty	Unit price (N)	Total price (N)	Qty	Unit price (N)	Total Price (N)	Total Qty	Total Balance (N)
Bal b/d	40	10	400	-	-	-	40	400
April 4	140	11	1540	-	-	-	180	1940
April 10	-	-	-	40	10	400
				50	11	550
				90		950	90	990

Receipt or Bought				Issues or Sold			Balance
Date	Qty	Unit price (N)	Total price (N)	Qty	Unit price (N)	Total Price (N)	Total Qty	Total Balance (N)
April 12	60	12	720	-	-	-	150	1710
April 13	-	-		90 10	11 12	990 120
				100		1110	50	600

The above table in April 12, we bought. So we have to add up our goods both in quantity and in Naira value to get our current total quantity and current total balance as illustrated above.

Then in April 13, we sold. When we sold goods, it will reduce our value in goods and even the amount we sold will be deducted from our current total balance total unit price.