Loading....
Coupon Accepted Successfully!

 

Exclusions from the Cost of Inventories

In determining the cost of inventories in accordance with previous paragraphs, it is appropriate to exclude certain costs and recognise them as expenses in the period in which they are incurred. Examples of such costs are:
 

a. Abnormal amounts of wasted materials, labour, or other production costs
 

b.  Storage costs, unless, those costs are necessary in the production process prior to a further production stage
 

c. Administrative overheads that do not contribute to bringing the inventories to their present location and condition
 

d.  Selling and distribution costs

Let's Practice.

Question.1
From the following data, calculate the value of closing inventory according a FIFO and LIFO and weighted Average on March 31, 1998 using :       
March 1  Stock-in-hand 400 units @ Rs.7.50 each.

Purchases
March 5  600 units @ Rs. 8 each
March 15 500 units @ Rs.9 each
March 25 400 units @ Rs.8.50 each
March 30 300 units @ Rs.9.50 each.

Issues
March 3  300 units
March 10 500 units
March 17 400 units
March 26 500 units
March 31 200 units
 
Ans. Penodic:- FIFO = 2850               LIFO = 2250   Weighted = 2529
Question.2
With the help of following particulars, prepare stores account, showing issue of materials on the basis of ‘Last In First Out’ (LIFO) method” and FIFO and weighted Average:
Purchases
 
May   3, 1998 500 kg. @ Rs. 2.00 per kg.
May  18,   1998 350 kg. @ Rs. 2.10 per kg.
May  25,   1998 600 kg. @ Rs. 2.20 per kg.
May  28, 1998 500 kg. @ Rs. 2.30 per kg.
 
Issues
 
May  19, 1998 600 kg. on requisition No. 1
May  26, 1998 450 kg. on requisition No. 2
May  29, 1998 510 kg. on requisition No. 3
May  30, 1998 150 kg. on requisition No.4
 
Assume that there was no opening stock.
 
Ans: FIFO = 552         LIFO = 480       Weighted = 537
Question.3
The following are the details of a spare part of SriramMills :
1.1.98 Opening stock Nil
1.1.98 Purchases     100 units @ Rs. 30 per unit
15.1.98 Issued for consumption 50 units
1.2.98 Purchases 200 units @ Rs. 40 per unit
15.2.98 Issued for consumption 100 units
20.2.98 Issued for consumption 100 units
1.3.98 Purchases 150 units @ Rs. 50 per unit
15.3.98 Issued for consumption 100 units
 
Find out the value of stock as on 31.3.98 if the company follows:
1. First in First out basis.
2. Last in First out basis, and
3. Weighted Average basis.
 
Ans: Perpetual:-  FIFO = 5000   LIFO = 4000 Weighted Average = 4700




Test Your Skills Now!
Take a Quiz now
Reviewer Name