Effects of pricing methods and rising prices

Weighted avg method.This method evens out

the effects of widely varying prices. Thus when
the prices are showing a rising trend, the effect
of rise in prices is reduced. This is because the
rise in prices is spread over a larger no of
units…

LIFO method… this method charges production

with the latest prices paid. Thus, higher prices
of the most recent purchases are charged to
operations. This keeps the profit figure low and
may result in tax saving.. however, the value of
closing stocks is at the older prices and is thus
undervalued.