Inventory Costing Methods Summary
Akhil ScariaOverview
This document summarizes the inventory valuation and cost calculations for an item under various costing methods, using the following input data:
Stock Receipts (GRNs)
| Type | Item | Qty | Unit Price | Total |
| GRN | Item A | 10 | 100 | 1000 |
| GRN | Item A | 10 | 150 | 1500 |
| GRN | Item A | 10 | 10 | 100 |
| GRN | Item A | 4 | 100 | 400 |
| 3000 (Total Stock Value) |
Stock Issues (Invoices)
| Type | Item | Qty | Unit Price | Total |
| INVOICE | Item A | 10 | 50 | 500 |
| INVOICE | Item A | 10 | 50 | 500 |
| INVOICE | Item A | 10 | 50 | 500 |
| 1500 (Total Issued Qty: 30) |
Calculations by Costing Methods
General Facts:
Initial Stock Qty: 34
Issued Qty: 30
Balance Qty after issue: 4
FIFO (First In First Out)
Issue Calculation (oldest first):
10 @ ₹100 = ₹1000
10 @ ₹150 = ₹1500
10 @ ₹10 = ₹100
Total Issue Value = ₹2600
Remaining Stock:
4 @ ₹100 = ₹400
Unit Cost (Remaining): ₹100.00
Closing Stock Value: ₹400.00
LIFO (Last In First Out)
Issue Calculation (latest first):
4 @ ₹100 = ₹400
10 @ ₹10 = ₹100
10 @ ₹150 = ₹1500
6 @ ₹100 = ₹600
Total Issue Value = ₹2600
Remaining Stock:
4 @ ₹100 = ₹400
Unit Cost (Remaining): ₹100.00
Closing Stock Value: ₹400.00
Weighted Average
Average Cost per Unit: ₹3000 / 34 = ₹88.24
Issue Value:
- 30 @ ₹88.24 = ₹2647.20
Remaining Stock:
4 @ ₹88.24 = ₹352.80
Unit Cost (Remaining): ₹88.24
Closing Stock Value: ₹352.80
Standard Costing
Standard Cost Assumed: ₹90.00
Issue Value:
- 30 @ ₹90.00 = ₹2700
Remaining Stock:
4 @ ₹90.00 = ₹360.00
Unit Cost (Remaining): ₹90.00
Closing Stock Value: ₹360.00
Actual Costing (Lot Based)
Assumes FIFO-style issue per lot tracking. Same as FIFO.
Issue Value: ₹2600
Remaining Stock:
4 @ ₹100 = ₹400
Unit Cost (Remaining): ₹100.00
Closing Stock Value: ₹400.00
Final Comparison
| Method | Cost/Unit | Issue Qty | Issue Value | Balance Qty | Closing Stock Value |
| FIFO | ₹100.00 | 30 | ₹2600.00 | 4 | ₹400.00 |
| LIFO | ₹100.00 | 30 | ₹2600.00 | 4 | ₹400.00 |
| Weighted Avg | ₹88.24 | 30 | ₹2647.20 | 4 | ₹352.80 |
| Standard | ₹90.00 | 30 | ₹2700.00 | 4 | ₹360.00 |
| Actual (FIFO) | ₹100.00 | 30 | ₹2600.00 | 4 | ₹400.00 |
Notes
FIFO and Actual (lot-wise) produce the same result when issued in order.
Standard costing ignores GRN prices.
Weighted average offers a smoothing method.
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