The computation of equivalent units under FIFO method differs from weighted average method in two ways. First the units transferred out figure is divided into two parts. One part consists of the units from beginning inventory that were completed and transferred out, and the other part consists of the units that were both started and completed during the current period. Second full consideration is given to the amount of work expended during the current period on units in the beginning work in process inventory as well as units in the ending inventory. Thus, under the FIFO method, it is necessary to convert both beginning and ending inventories to an equivalent unit basis. For the beginning inventory, the equivalent units represent the work done to complete the units; for the ending inventory, the equivalent units represent the work done to bring the units to a stage of partial completion at the end of the period ( the same as with the weighted average method). The formula for computing equivalent units of production is more complex under FIFO method than under weighted average method. On December 31, 2006 Company appropriately changed to the FIFO cost method from The weighted-average cost method for financial statement and income tax purposes. the change will result in a $70,000 increase in the beginning inventory @January 1, 2006. Assuming a 40 Percent income tax rate, the cumulative effect of this accounting change reported for the year ended December 31,2006, is
A. 700,000
B. 420,000
C. 350,000
D. 280,000
My Answer is 700,000/40%=280,000
Is any one have idea abourt FIFO cost method.
Help is really appreciated
There are different inventory costing methods an accountant can use for cost o goods sold accounting. The methods include last in, first out, average cost method, first in, first out, and specific identification method.
Inventory methods include first in-first out, or other logical method. In this case, however, diamond traders probably keep inventory records and execute trades in methods that are the most profitable at the time of the trade.
which type of inventory method used in top ten company?
two traditional methods: Average rate of return (ARR) and Payback (PB)...
However the long term decrease in liquidity since the late 1960's can be traced to more efficient inventory management practices such as just in time, point of sale, and other methods of inventory management; it can also be traced to electronic cash flow transfer systems and the ability to sell accounts receivable through the security of assets.
These would yield similar results if your cost of purchasing inventory from suppliers has stayed relatively constant.
in weighted average method we assigns the weight to the averages while in average methods we dnt do this
FIFO and weightage average method are the generally used methods in inventory calculations.
Weighted average or first in first out
Inventory can be valued in many different ways but there are 3 popular methods. One is called FIFO (first in first out), another called LIFO (last in first out) and the last called weighted average. See here for the basics and a more thorough description of Inventory Valuation.... http://vitalbusinessinfo.blogspot.com/2009/10/basics-of-inventory-valuation.html
There are different inventory costing methods an accountant can use for cost o goods sold accounting. The methods include last in, first out, average cost method, first in, first out, and specific identification method.
Following are inventory valuation methods: 1 - Lifo (Last in first out) 2 - Fifo (First in first out) 3 - Average method.
Inventory valuation methods: 1- LIFO (Last in first out) 2- FIFO (First in first out) 3 - Average Method
Methods of Inventory Management include cycle counting, reviewing stock and incorporating ABC Analysis. By utilizing all of these methods will help keep inventory accurate and profitable.
Here's a couple of reasons/examples why profit is subjective:1) Inventory valuation methods (LIFO,FIFO, average cost, etc.)Change the inventory valuation method, and the reported profit will change also.2)Depreciation methods(straight line, double-declining balance, etc.)Again, if thedepreciation methodis changed, reported profit changes too.
1. Weighted Average 2. LIFO (Last-in-last Out) 3. FIFO (First-in-first-out) 4. Lower of cost or market (LCM) 5. Gross Profit Method 6. Dollar-Value- LIFO 7. Retail Method 8. Dollar-value LIFO retail
Methods of valuing the stock are two which are FIFO(first in first out and weighted average.BUT what the best metod of valuing stock during inflation?