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Cost Ascertainment - Elements of Cost

This document discusses elements of cost ascertainment, including: 1) Calculating simple monthly averages for prices received in January and February. 2) Calculating moving monthly simple averages for January-February and February-March. 3) Demonstrating how the value of the balance in stock changes under weighted average pricing when receipts and issues occur in January. 4) Showing the calculation of the value of the month-end balance when weighted average pricing is used at the end of each month.

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44 views1 page

Cost Ascertainment - Elements of Cost

This document discusses elements of cost ascertainment, including: 1) Calculating simple monthly averages for prices received in January and February. 2) Calculating moving monthly simple averages for January-February and February-March. 3) Demonstrating how the value of the balance in stock changes under weighted average pricing when receipts and issues occur in January. 4) Showing the calculation of the value of the month-end balance when weighted average pricing is used at the end of each month.

Uploaded by

sonuponnada952722
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Cost Ascertainment - Elements of Cost

(ii) What are the moving monthly simple average price for January -February and February-March?
(iii) If a weighted average is used for pricing issues how does the value of the balance in stock change
during January?
(iv) If a weighted average price is calculated at the end of each month and is then used for pricing
the issued of that month, what will be the value of the month-end balance?
Solution:

(i) Simple Average Price of February Receipts.


Simple Average Price of February Receipts = (12 + 16.9) / 2 = ` 14.45
(ii) Simple Average Price of January Receipts
Simple Average Price of January Receipts = (17 + 10 + 8) / 3 = ` 11.67
Moving monthly average for Jan-Feb = (11.67 + 14.45) / 2 = ` 13.06
Moving monthly average for Feb-March = (14.45 + 20) / 2 = ` 17.225

(iii) Stores Ledger Account (under weighted average method for January)

Receipts Issue Balance


Qty. Price Value Qty. Price Value Qty. Value
Date ` ` ` ` `
Jan 9th 10 17 170 -- -- -- 10 170
Jan 19th 25 10 250 -- -- -- 35 420
Jan 20th -- -- -- 10 12 120 25 300
Jan 29th -- -- -- 20 12 240 5 60
Jan 30th 15 8 120 -- -- -- 20 180

(iv) Calculation of the Value of month-end balance

Date Quantity Value


Jan 9th 10 170
Jan 19th 25 250
Jan 30th 15 120
50 540
(-) Issues 30 (10.8) 324
Jan-Balance 20 216
Feb 13th 20 240
Feb 27th 10 169
Feb Balance 50 625
(-) Issues 40 (12.5) 500
10 125
March 30th 20 400
30 525
(-) Issues 20 (17.5) 350
Balance 10 175

58 COST ACCOUNTING

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