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Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
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Material Costing
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Material Costing The annual demand for the material is 4,000 tonnes. Stock holding costs are 20%
of material cost per annum. The delivery cost per order is Rs.6. You are required
Illustration 2.1: A consignment consisting of 4 grades of materials was purchased to calculate the best quantity to order.
for Rs.1,20,000. Storekeeper sorted them out and recorded the following :
Grade A - 4,000 units Illustration 2.6: Find out Re-order Quantity if consumption is 70 - 100 units per
Grade B - 8,000 units day, deliver period is 2 - 6 days and maximum level is 810 units.
Grade C -10,000 units [B. Com. Delhi] [350 Units]
Grade D - 12,000 units
Total sales of grade A amounted to Rs.16,000 (rate of profit being 33 1/3% of cost) Illustration 2.6 (New Book): XYZ Ltd. manufactures a product A. The following
and those of B at a price 1 1/2 times that of A, but the rate of profit was 33 1/3% of particulars were collected for the year 2018 :
sales. Similarly Grade C material was sold for Rs.50,000, yielding a profit of 20% Cost of placing an order Rs.90
of sales. Calculate the purchase price of each grade on the basis of the above Annual carrying cost per unit Rs.5.20
information. Normal usage 50 units per week
[B. Com. (Pass) Delhi] Minimum usage 25 units per week
[Total Costs: A- Rs.12,000; B- Rs.32,000; C- Rs.40,000; D- Rs.36,000 Maximum usage 75 units per week
Cost Per unit: A- Rs.3; B- Rs.4; C- Rs.4; D- Rs.3] Re-order period 4 to 6 weeks
Illustration 2.2: From the following particulars, find Economic Order Quantity: Compute from the above :
Annual Demand = 3,200 units (i) Re-order Quantity, (ii) Re-order Level, (iii) Minimum Level, (iv) Maximum Level,
Unit Cost = Rs.6 (v) Average Stock Level
Cost of Carrying Inventory = 25% p.a., [(i) 300 units; (ii) 450 units; (iii) 200 units; (iv) 650 units; (v) 425 units or 350 units]
Cost of one procurement = Rs.150
[800 Units] Illustration 2.7: Calculate the Maximum Stock Level from the following :
EOQ : 300 units
Illustration 2.3: A factory requires 1,500 units of an item per month, each costing Usage Rate : 25 to 75 units per week
Rs.27. The cost per order is Rs.150 and the inventory carrying charges worked Recorder Time : 4 to 6 weeks
out is 20% of the average inventory. Find out the economic order quantity and the [B. Com. Delhi] [650 Units]
number of orders per year.
[EOQ: 1000 Units; No. of orders: 18] Illustration 2.8: The following information is available in respect of material No.
30:
Illustration 2.4: ‘A’ a refrigerator manufacturer purchases 1,600 units of certain Re-order quantity = 1,500 units
component from ‘B’. His annual usage is 1,600 units. The order placing cost is Re-order period = 4 to 6 weeks
Rs.100 and the cost of carrying one unit for a year is Rs.8. Calculate the economic Maximum consumption = 400 units per week
ordering quantity, number of orders, time intervals between two orders in a year Normal consumption = 300 units per week
and tabulate your results. Minimum consumption = 250 units per week
[200 Units] Calculate :
(a) Re-order level; (b) Minimum level; (c) Maximum level; (d) Average stock
Illustration 2.5: A firm is able to obtain quantity discounts on its orders of material level
as follows : [(a): 2,400 Units; (b): 900 Units; (c): 2,900 Units; (d): 1,900 Units]
Price(Per Tonne) Quantity (Tonnes)
Rs.6.00 : Less than 250 Illustration 2.9: Two components, A and B are used as follows :
Rs.5.90 : 250 and less than 800 Normal usage = 50 units per week each
Rs.5.80 : 800 and less than 2,000 Minimum usage = 25 units per week each
Rs.5.70 : 2,000 and less than 4,000 Maximum usage = 75 units per week each
Rs.5.60 : 4,000 and over.
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Re-order quantity = A - 300 units; B - 500 units (iii) Cost per unit : Rs.40
Re-order period = A - 4 to 6 Weeks; B - 2 to 4 Weeks (iv) Storage and carrying cost : 80% on average inventory
Calculate for each component : [158 Units]
(a) Re-order level; (b) Minimum level (c) Maximum level (a) Average stock level
[A & B for (a): 450 Units & 300 Units; (b): 200 Units & 150 Units; Illustration 2.15: The following is the record of receipt of certain materials during
(c): 650 Units & 750 Units; (d): 350 Units & 400 Units] the month of February 2018 :
Feb. 1 : Received 400 units for job No. 12 @Rs.10 per unit.
Illustration 2.9 (New Book): Two components, A and B are used as follows : Feb. 4 : Received 300 units for job No. 13 @ Rs.11 per unit.
Normal usage .... .... .... .... 50 units per week each Feb. 16 : Received 200 units for job No. 14 @ Rs.12 per unit.
Minimum usage .... .... .... .... 25 units per week each Feb. 25 : Received 400 units for job No. 15 @ Rs.13 per unit.
Maximum usage .... .... .... .... 75 units per week each During February 2018 following issues of materials are made :
Re-order quantity .... .... .... .... A : 300 units, B : 500 units Feb. 10 : Issued 200 units to Job No. 12.
Re-order period .... .... .... .... A : 4 to 6 Weeks, B : 2 to 4 Weeks Feb. 15 : Issued 100 units to Job No. 13.
Calculate for each component : Feb. 17 : Issued 200 units to Job No. 12.
(a) Re-order level, (b) Minimum level, (c) Maximum level, (d) Average stock level. Feb. 20 : Issued 200 units to Job No. 14.
[(a) A 300 units & B 300 units; (b) A 200 units & B 150 units Feb. 26 : Issued 100 units to Job No. 13.
(c) A 650 units & B 750 units;(d) A 425 or 450 units & B 350 or 400 units] Feb. 28 : Issued 200 units to Job No. 15.
Show how these transactions will appear in the Stores Ledger under FIFO, LIFO,
Illustration 2.11: A company uses 2500 units of a material per month. Cost of Weighted Average and Simple Average Methods.
placing an order is Rs.150. Cost per unit is Rs.20. The re-order period is 4 to 8 [Closing stock of 300 units; FIFO: Rs.3,700]
weeks. The minimum consumptions of raw materials are 100 units whereas the
average consumptions are 275 units. The carrying cost of inventory is 20% per Illustration 2.16: A firm maintains its stores ledger on the FIFO method. During
annum. the month of Januanry 2018 the following receipts and issues of materials were
Calculate : (a) Re-order quantity; (b) Re-order level made. Record these transactions in the stores ledger.
[(a): 1,500 Units; (b): 3,600 Units] Receipts
Jan. 1 : Balance 50 units @ 4 per unit
Illustration 2.12: Medical Aids Co. manufactures a special product A. The Jan. 5 : Purchase Order No. 10, 40 units @ 3 per unit
following particulars were collected for the year 2018 : Jan. 8 : Purchase Order No. 12, 30 units @ 4 per unit
Cost of placing an order : 100 Jan. 15 : Purchase Order No. 11, 20 units @ 5 per unit
Annual carrying cost per unit : 15 Jan. 25 : Purchase Order No. 13, 40 units @ 3 per unit
Normal usage : 50 units per week
Issues
Minimum usage : 25 units per week
Jan. 10 : Material Requisition No. 4, 70 units
Maximum usage : 75 units per week
Jan. 12 : Material Requisition No. 5, 10 units
Re-order period : 4 to 6 weeks
Jan. 20 : Material Requisition No. 6, 20 units
Compute from the above :
Jan. 24 : Material Requisition No. 7, 10 units
(a) Re-order Quantity; (b) Re-order Level; (c) Minimum Level; (d) Maximum Level;
Jan. 27 : Shortage 5 units
(e) Average Stock Level
Also show how these transactions will appear in the Stores Ledger under LIFO,
[(a): 186 Units; (b): 450 Units; (c): 200 Units; (d): 536 Units; (e): 368 Units]
Weighted Average, Standard Price Method (Rs.4) and Simple Average Methods.
[Closing stock of 65 units; FIFO: Rs.240; Weighted Average: Rs.224.35;
Illustration 2.13: From the following information, calculate economic order quantity
Standard Price: Rs.200]
and the number of orders to be placed in one quarter of the year for product X :
(i) Quarterly consumption of material : 2,000 kg.
Illustration 2.25: A furniture manufacturer purchased 10,000 cubic feet of timber
(ii) Cost of placing one order : Rs.50
logs on 1st October, 2018 @ 10 per cubic feet and stored them in his timber yard
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for six months for seasoning. In timber yard the following items of expenses were Illustration 2.29: From the following details in respect of a material item for the
incurred during the period of seasoning : month of Dec. 2000, calculate Cost of Material Consumed and the Value of
(i) Rent of the yard (2,000 sq. ft.) Rs.250 per month. Closing Stock under (i) LIFO; (ii) FIFO (ii) Simple Average Price Methods:
(ii) Salaries of 2 watchmen and Khalasis @ Rs.250 per month each. Opening Stock :
(iii) Incidental expenses of maintenance, lighting etc. @ 150 per month. 01.12.2018 : 500 units @ 2. Per unit
(iv) Annual share of general overhead expenses of the business Rs.2,000. Purchases :
(v) Insurance charges for the logs to be seasoned @ 1% on the value of 05.12.2018 : 1,000 units @ 3 per unit
unseasoned logs for the periods of seasoning. 08.12.2018 : 1,500 units @ 4 per unit
50% of floor area of the yard has been set apart for seasoning timer and the Issued to Production :
remaining floor area is occupied by the shops making furniture. Loss in volume of 10.12.2018 : 1,600 units
logs due to seasoning is 10%. [Closing stock of 1,400 units; LIFO: Rs.3,700; FIFO: Rs.5,600; Simple Average: Rs.5,200]
Calculate the price to be charged on issue of the seasoned logs per cubic feet to
the nearest rupee. Illustration 2.30: M/s Swadeshi Mills Ltd. take a periodic inventory of their stocks
[Total Cost: Rs.1,04,200; Cost per cubic feet: Rs.11.57] of chemical Y at the end of each month. The physical inventory taken on June 30
show a balance of 1,000 litres of chemical Y in hand @ Rs.2.28 per litre.
Illustration 2.27: From the following information prepare Store Ledger Account The following purchases were made during July :
as per LIFO and FIFO method : July, 1 : 14,000 litres @ 2.30 per litre
Date Particulars Quantity Rate per unit (Rs.) July, 7 : 10,000 litre§ @ 2.32 per litre
Jan. 1 Received 1,000 Units 1.00 July, 9 : 20,000 litres @ 2.33 per litre
Jan. 10 Receved 260 Units 1.05 July, 25 : 5,000 litres @ 2.35 per litre.
Jan. 20 Issued 700 Units A physical inventory on July 31 discloses that there is a stock of 10,000 litres. You
Jan. 21 Received 400 Units 1.15 are required to compute the inventory value on July 31, by each of the following
Jan. 22 Received 300 Units 1.25 methods : (1) First in First Out; (ii) Last in First Out (iii) Average Cost Method
Jan. 23 Issued 620 Units [Closing stock of 10,000 Liters; FIFO: Rs.23,400; LIFO: Rs.22,980;
Jan. 24 Issued 240 Units Average Cost Method: Rs.23,206]
Jan. 25 Received 500 Units 1.10
Jan. 26 Issued 380 Units Illustration 2.31: The stores ledger of a manufacturing company recorded for
[Closing stock of 520 units; FIFO: Rs.532; LIFO: Rs.575] material
item P-18 for June, 2000 the following information :
Illustration 2.28: From the following particulars, prepare Stores Ledger Account June, Qty. Rate per unit Value Qty. Rate per unit Value
by using First-in-First Out (FIFO) Method and Last-in-First Out (LIFO) Method: 2018 (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
April 1 : Stock in hand 500 units at 20 per unit
1 — — — 100 2 200
April 3 : Issued 200 units
----------------------------------------------------------------------------------------------------------
April 3 : Purchased 150 units at 22 per unit
10 200 2 400 100 2
April 4 : Issued 100 units
200 2 600
April 5 : Purchased 200 units at 25 per unit
----------------------------------------------------------------------------------------------------------
April 6 : Issued 300 units
15 300 4 1,200 100 2
April 6 : Returned to store 10 units (issued on 4th April)
200 2
April 7 : Issued 100 units
300 4 1,800
April 8 : Issued 50 units
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On 10th April, it was noticed that there is a shortage of 10 units.
16 — — — 100 2
[Closing stock of 100 units; FIFO: Rs.2,470; LIFO: Rs.2,000]
300 4 1,400
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June, Qty. Rate per unit Value Qty. Rate per unit Value Raw Usage Reorder Rate per Delivery Order Minimum
20 — — — 100 4 400 Material per unit (lb) Qty. (lb) unit (lb) in weeks Level (lb) Level (lb)
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
25 400 5 2,000 100 4
A 10 10,000 10 1-3 8,000
400 5 2.400
B 4 5,000 30 3-5 4,750
----------------------------------------------------------------------------------------------------------
C 6 10,000 15 2-4 2,000
28 — — — 200 5 1,000
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Weekly production varies from 175 to 225 units, averaging 200 units. What would
29 — — — 50 5 250
you expect the quantities of the following to be :
----------------------------------------------------------------------------------------------------------
(a) Minimum stock of A
(a) State the method of pricing that was employed in the ledger
(b) Maximum stock of B
(b) Complete the store ledger as per the method followed
(c) Re-order level of C
[B. Com. Delhi, Adapted]
(d) Average stock level of A
[(a) FIFO Method; (b) Closing stock of 50 Units of Rs.250]
[(a) 4,000; (b) 7,650; (c) 5,400; (d) 9,000 or 10,125]

Q-3: The following data pertain to material X :

PRACTICAL PROBLEMS
Supply period : 4 to 8 months
Q-1: The following information regarding the receipts and issues of pigments
Consumption rate :
has been extracted from the stores record of a paint manufacturing factory :
Maximum : 600 Units Per Month
April 2018 kg.
Minimum : 100 Units Per Month
1. Opening stock of pigments 25,000
Normal : 400 Units Per Month
(There were no issues or receipts during the last week of March)
Yearly : 3,600 Units Per Month
2. Issued on Requisition No.1 13,000
Storage costs are 5% of stock value, ordering Costs are Rs.40 per order and
3. Issued on Requisition No.2 2,000
price per unit of material is Rs.64
4. Received from a supplier by challan No. 13 30,000
Calculate :
5. Issued on Requisition No.3 10,000
(i) Re-order level;
6. Issued on Requisition No.4 5,000
(ii) Minimum stock level;
7. Received from supplier by challan No. 48. 10,000
(iii) Maximum stock level; and
8. Issued on Requisition No.5 4,500
(iv) Average stock level.
Examination by the stock verifier on 6th morning revealed a shortage of 500 kg.
[(i) 4,800 units; (ii) 3,000 mits; (iii) 4,700 units (iv) 3,150 or 3,850 units]
Maximum stock limit 50,000
Minimum stock limit 8,000
Q-4: In manufacturing its product RS, a company uses two types of raw materials
Ordering stock level 25,000
A and B in respect of which the following information is supplied :
You are required to prepare Bin Card No. 36 for the item pigment for which the
One unit of RS.requires 10 kg. of A and 4 kg. of B materials. Price per kg. of A
symbol allotted is X-40.
material is RS.10 and that of B is 7 20. Re-order quantities of A and B materials
[Closing Stock: 30,000 kg]
are 10,000 kg. and 5,000 kg. Re-order levels of A and B materials are 8,000 kg.
and 4,750 kg. repectively. Weekly production varies from 175 units to 225 units
Q-2: In manufacturing its products, a company uses three raw materials A, B and
averaging 200 units. Delivery period ofA material is 1 to 3 weeks and B material
C in respect of which the following apply :
3 to 5 weeks.
Compute :
(i) Minimum Stock level of A.
(ii) Maximum Stock level of B.
[(i) 4,000 Kgs., (ii) 7,650 Kgs]
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Q-5: From the following information you are required to calculate maximum level, Maximum Usage .... .... .... .... 80 units per week
minimum level and ordering level for materials X and Y : Average Re-order Period .... .... .... .... 6 weeks
X Y [120 units]
Normal usage per week 150 200
Reordering quantity 900 1500 Q-9: Calculate Economic Order Quantity from the following information :
Maximum usage per week 225 250 Annual Consumption 1,00,000 units
Minimum usage per week 75 100 Ordering Cost 50 per order
Reordering periods (weeks) 12 to 18 6 to 12 Carrying Cost 8% of Average Stock
[Maximum, Minimum and Order Level of X: 4,090; 1,800; 4,050 & Y: 3,900; 1,200; 3,000] Per Unit Cost 20
[2500 units]
Q-6: From the following particulars find out the Economic Order Quantity :
(i) Annual Demand : 12,000 units Q-10: A manufacturer buys certain equipment from outside suppliers at 30 per
(ii) Ordering Cost : Rs.90 Per order unit. Total annual needs are 800 units.
(iii) Inventory Carrying Cost per annum : Rs.15 The following further data are available :
[379 units (approx)] Annual return on investment 10%
Rent, taxes, insurance per unit, per year Re. 1
Q-6 (New Book): Find out the economic order quantity (EOQ) from the following Cost of placing an order Rs.100
information: Determine the economic order quantity.
Raw materials .... .... .... .... Rs.6,000 [200 units]
Quarterly Demand .... .... .... .... 12,000 units
Costof placing an order .... .... .... .... Rs.48 per order Q-11: Pumpkin Pump Co. uses about 75,000 valves per year and the usage is
Cost per unit .... .... .... .... Rs.24 fairly constant at 6,250 valves per month. The valves cost 1.50 per unit when
Carrying cost as % of average inventory .... .... .... .... 12% bought in quantities and the carrying cost is estimated to be 20% of average
[Ans. 400 units] inventory investment on the annual basis. The cost to place an order and process
the delivery is 18. It takes 45 days to receive delivery from the date of an-order
Q-7: What do you understand by Economic Order Quantity ? Find out the EOQ and a safety stock of 3,200 valves is desired.
from the following particulars : Annual usage Rs.1,60,000 @ Rs.40 per unit : Cost You are required to determine :
of placing and receiving one order Rs.200: Annual carrying cost : 25% of inventory (i) Most economical order quantity and frequency of orders;
value. (ii) Re-order point
[400 units] (iii) discuss the problems that most firms would have in attempting to apply the
economic order quantity (EOQ) formula to their inventory problems.
Q-8: From the following information, calculate Re-order quantity : [(i) 3,000; (ii) 12,575]
Maximum Re-order Period 8 weeks
Average Stock 400 units Q-12: After inviting tenders, two quotations are received as under :
Average usage 50 units per week Supplier A — Rs. 2.20 per unit.
Maximum Usage 80 units per week Supplier B — Rs. 2.10 per unit + 2,000 fixed charges irrespective of units ordered.
Average Re-order period 6 week (i) Calculate the order quantity for which the purchase price per unit will be the
[640 units] same.
(ii) Select the supplier if the purchase officer wants to place an order for 15,000
Q-8 (New Book): From the following information, calculate Re-order quantity : units.
Maximum Re-order Period .... .... .... .... 8 weeks [(i) 20,000; (ii) A]
Average Stock .... .... .... .... 400 units
Average Usage .... .... .... .... 50 units per week Q-13: Calculate the Economic Order Quantity from the following information.
Also state the number of orders to be placed in a year :
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Consumption of materials per annum 10,000 kg. 18.5.2018 225

Order placing costs per order Rs.50 28.5.2018 350
Cost per kg. of raw-materials Rs.2 There was no “Opening stock”. Compute the inventory value on 31st May 2018
Storage costs 8% on average inventory by LIFO Method.
[(i) 2,500 kg; (ii) 4] [505 units of Rs.818]

Q-14: From the following information relating to a type of raw material, calculate Q-17: A manufacturer who has newly set up the factory used cost price as the
EOQ : basis for charging out materials to jobs. The receipts side of the stores ledger
Monthly demand 200 units account shows the following particulars :
Unit price Rs.5 500 articles bought at Rs.3.00 each.
Order cost per order Rs.12 700 articles bought at Rs.3.10 each.
Storage costs 2% p.a. 400 articles bought at RS.3.20 each.
Interest rate 10% p.a. 800 articles bought at Rs.3.10 each.
[310 units] Successive issues were made of 300, 1,000 and 200 articles.
At what price per article should each of these issues be charged under FIFO
Q-15: The purchase department of your organisation has received an offer of Method?
quantity discounts on its orders of materials as under : [Stock 900 units of Rs.2,800]
Price per tonne Tonnes
Rs.1,400 Less than 500 Q-18: Explain the following two methods of pricing of material issues and also
Rs.1,380 500 and less than 1,000 the circumstances under which these methods are used.
Rs.1,360 1,000 and less than 2,000 LIFO
Rs.1,340 2,000 and less than 3,000 FIFO
Rs.1,320 3,000 and above. Draw a stores ledger card recording the following transactions that took place in
The annual requirement of the material is 5,000 tonnes. The delivery cost per a month under the above two methods :
order is Rs.1,200 and the annual stock holding cost is estimated at 20% of the 01.01.2018 Opening stock 200 pieces @ Rs.2 each
average inventory. The Purchase Department wants you to consider the following 05.01.2018 Purchases 100 pieces @ Rs.2.20 each
purchase options and advise which among them will be the most economical 10.01.2018 Purchases 150 pieces @ Rs.2.40 each
ordering quantity, presenting the relevant information in a tabular form. The 20.01.2018 Purchases 180 pieces @Rs.2.50 each
purchase quantity options to be considered are 400 tonnes, 500 tonnes, 1,000 02.01.2018 Issues 150 pieces
tonnes, 2,000 tonnes and 3,000 tonnes. 07.01.2018 Issues 100 pieces
[1,000 tonnes] 12.01.2018 Issues 100 pieces
28.01.2018 Issues 200 pieces
VALUATION OF MATERIALS [LIFO: 80 units of Rs.172; FIFO: 80 units of Rs.200]
Q-16: The following purchases and issues of tin were made during the month of
May 2000 : Q-19: Prepare a Stores Ledger Account from the following transactions assuming
Received : that the issue of store have been priced on the principle of ‘last-in-first-out’ :
Date Quantity Unit Cost (Rs.) Amount (Rs.) 01.01.2018 Received 1,000 units as Rs.20 per unit
01.5.2018 150 1.50 225 10.01.2018 Received 260 units as Rs.21 per unit
10.5.2018 450 1.60 720 20.01.2018 Issued 700 units
25.5.2018 600 1.70 1,020 04.02.2018 Received 400 units as Rs.23 per unit
Issued : 21.02.2018 Received 300 units as Rs.25 per unit
Date Quantity 16.03.2018 Issued 620 units
12.5.2018 120 12.04.2018 Issued 240 units
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10.05.2018 Received 500 units at Rs.22 per unit Feb. 1 Opening balance 500 units @ Rs.25.00
25.05.2018 Issued 380 units Feb. 3 Issued 70 units
[LIFO: 520 units of Rs.10,640; FIFO: 520 units of Rs.11,500] Feb. 4 Issued 100 units
Feb. 8 Issued 80 units
Q-20: The following transactions took place in respect of a material item: Feb. 13 Received from vendor 200 units @ Rs.24.50
Date Receipts (Qty.) Rate (Rs.) Issue (Qty.) Feb. 14 Refund of surplus from a work order 15 units @ Rs.24.00
02.03.2018 200 2.00 Feb. 16 Issued 180 units
10.03.2018 300 2.40 Feb. 20 Received from vendor 240 units @ Rs.23.00
15.03.2018 250 Feb. 24 Issued 304 units
18.03.2018 250 2.60 Feb. 25 Received from vendor 320 units @ Rs.25.50
20.03.2018 200 Feb. 26 Issued 112 units
Prepare a priced Ledger Sheet, pricing the issues at (a) Simple average rate; (b) Feb. 27 Refund of surplus from a work order 12 units @ Rs.24.50
Weighted average rate. Feb. 28 Received from vendor 100 units @ Rs.25.00
[(a) 300 units of Rs.720, (b) 300 units of Rs.726] Feb. 29 Returned to vendor 50 units
The store verifier of the factory noted that on 15th he had found a shortage of 5
Q-21: Show the stores ledger entries as they would appear when using : units and on the 27th another shortage of 8 units. Write out the complete Stores
(a) the Weighted Average Method; (b) the LIFO method; of pricing issues, in Ledger Account in respect of the above materials using (i) ‘first-in first-out’ and
connection with the following transactions : (ii) last-in-first-out’ principles.
Date Particulars Units Value [FIFO: 478 units of Rs.11,693; LIFO: 478 units of Rs.11,812]
01.04.2018 Balance in hand 300 600
02.04.2018 Purchased 200 440 Q-24: Oil India is a bulk distributor of high octane petrol. A periodic inventory of
04.04.2018 Issued 150 ? petrol on hand taken when the books are closed at the end of each month. The
06.04.2018 Purchased 200 460 following summary of information available for the month of June 2018 :
11.04.2018 Issued 150 ? Sales Rs.9,45,000
19.04.2018 Issued 200 ? General Administrative Cost Rs.25,000
22.04.2018 Purchased 200 480 Opening stock : 1,00,000 litres @ 3 per litre Rs.3,00,000
27.04.2018 Issued 250 ? Purchase (including freight in)
In a period of rising prices such as above, what are the effects of each method ? June 1 2,00,000 litres @ Rs.2.85 per litre
[(a) 150 units of Rs.342; (b) 150 units of Rs.300] June 30 1,00,000 litres @ Rs.3.03 per litre
Closing Stock June 30 1,30,000 litres
Q-22: Set up a Stores Ledger from and enter the following transactions adopting Compute the following data by the FIFO, Weighted Average and LIFO methods of
the weighted average method of pricing out issues : inventory costing assuming administration costs have not been included in the
cost of goods sold:
01.08.2018 Opening balance 50 units @ Rs.3 per unit. (a) Value of inventory on June 30
05.08.2018 Issued out to production : 2 units. (b) Amount of the cost of goods sold for June
07.08.2018 Purchased 48 units @ Rs.4 per unit. (c) Profit or loss for June
09..08.2018 Issued out 20 units to production. [FIFO: (a) Rs.3,88,500; (b) Rs.7,84,500; (c) Rs.1,35,500
19.08.2018 Purchased 76 units @ Rs.3 per unit. Weighted Average: (a) Rs.3,90,000; (b) Rs.7,83,000; (c) Rs.1,37,000
24.08.2018 Received back into stores 19 units out of 20 units issued on LIFO: (a) Rs.3,93,000; (b) Rs.7,80,000; (c) Rs.1,40,000]
09.08.2018 27.08.2018 Issued to production : 10 units.
[Stock 161 units of Rs.527.70] Q-25: Record the following transactions in the stores ledger charging material
issues at : (i) Simple average price, (ii) Periodic simple average price, (iii)
Q-23: The following is a history of the receipts and issues of materials in a Standard price taking standard price at Rs.1.15 :
factory, during February 2018 :
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Jan. 1 Received 1,000 units @ Re. 1 per unit 16th 50 100

Jan. 10 Received 260 units @ Rs.1.05 per unit 20th 40 240
Jan. 20 Issued 700 units 26th - - 90 270
Feb. 4 Received 400 units @ Rs.1.15 per unit (a) State the method of pricing that was employed in the Stores Ledger
Feb. 21 Received 300 units @Rs.1.25 per unit (b) Complete the Stores Ledger as per the method followed
Mar. 16 Issued 620 units [(a): Weighted Average Method; (b): Balance 70 units @ Rs.3 of Rs.210]
Apl. 12 Issued 240 units
May 10 Received 500 units @ Rs.1.10 per unit Q-29: Prepare Stores Ledger as per First In First Out Method of Pricing of Issue
May 25 Issued 380 units of Materials :
For computation of periodic average price, the period from January to May be Date Particulars Units Rate
taken as the base. April 1 Opening Balance 1,000 Rs.5
[(i) Stock 520 units of Rs.505; (ii) Stock 520 units of Rs.563; (iii) Stock 520 units of Rs.427] April 3 Received 5,000 Rs.6
April 4 Issued 3,000
Q-26: Prepare a Store Ledger Account on the basis of LIFO method. April 6 Issued 2,000
April 8 Received 3,000 Rs.5
01.01.2018 Opening Stock 220 units @ Rs.9.00 each April 9 Issued 2,000
04.01.2018 Purchased 540 units @ Rs.9.10 each The weekly physical stock taking on April 7, showed as shortage of 100 units.
05.01.2018 Issued 280 units [Balance 1,900 units @ Rs.5 of Rs.9,500]
10.01.2018 Purchased 180 units @ Rs.8.90 each
16.01.2018 Issued 160 units Q-30: From the following information prepare stores ledger account as per FIFO
18.01.2018 Purchased 340 units @ Rs.10.20 each method :
25.01.2018 Issued 200 units 01.01.2018 Opening Stock 200 pieces @ Rs.2 each
[Closing Stock of 640 units of Rs.5,952] 05.01.2018 Purchases 100 pieces @ Rs.2.20 each
10.01.2018 Purchases 150 pieces @ Rs.2.40 each
Q-27: The following are the figures about the receipt and issue of materials in 20.01.2018 Purchases 180 pieces @ 2.50 each
RS.Ltd. during January 2018. Prepare Stores Ledger Account using LIFO method. 02.01.2018 Issues 150 pieces
January 1, 2018, received 500 units @ Rs.2.00 each 07.01.2018 Issues 100 pieces
January 18, 2018, received 350 units @ Rs.2.10 each 12.01.2018 Issues 100 pieces
January 19, 2018, issued 600 units 28.01.2018 Issues 200 pieces
January 24, 2018, received 600 units @ Rs.2.20 each [Balance 80 units @Rs.2.50 of Rs.200]
January 25, 2018, issued 450 units
January 26. 2018, received 500 units @Rs.2.30 each Q-31: Prepare Stores Ledger from the following using Weighted Average method:
January 29, 2018, issued 510 units 01.02.2018 Opening Stock 200 units costing 2,000
[Closing Stock of 390 units Rs.808] Receipts
03.02.2018 : 300 units @ Rs.12 p.u.
Q-28: The Stores Ledger of a manufacturing company recorded for material R- 05.02.2018 : 100 units @ Rs.16 p.u.
17 for April 2018 the following information : 08.02.2018 : 200 units @ Rs.13 p.u.
Date Receipts Issues Issues
April Qty. Value Qty. Value 02.02.2018 : 100 units
2018 (Units) (Rs.) (Units) (Rs.) 04.02.2018 : 200 units
4th 100 160 07.02.2018 : 200 units
6th 40 120 09.02.2018 : 100 units
12th - - 70 140 The physical verification on 06.02.2018 revealed a shortage of 10 units.
[Balance 290 units @ Rs.13 of Rs.3,770]
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Q-31 (New Book): From the following information, prepare Stores Ledger Account January, 2007, prepare stores ledger account according to LIFO method :
as per FIFO method : 01.01.2018 Received 250 units @ Rs.10 per unit.
01.12.2018 : Opening balance 500 units @ Rs.10 per unit 05.01.2018 Received 250 units @ 11 per unit.
02.12.2018 : Issued 80 units 08.01.2018 Issued 300 units.
06.12.2018 : Issued 120 units 10.01.2018 Received 400 units @ Rs.12 per unit.
09.12.2018 : Issued 50 units 13.01.2018 Issued 250 units.
12.12.2018 : Received 200 units @Rs.9 per unit 20.01.2018 Received 100 units @ 11 per unit.
13.12.2018 : Returned to stores 15 units out of units issued on 6th December 28.01.2018 Issued 400 units.
18.12.2018 : Issued 180 units On 01.01.2018 stock in hand was 200 units valued @ Rs.9 per unit.
20.12.2018 : Received 240 units @ Rs.9.75 per unit [200 units @ Rs.9 and 300 @ Rs.10; Total: Rs.4,800].
23.12.2018 : Issued 300 units
25.12.2018 : Received 320 units @ Rs.9 per unit Q-35: Prepare the Store Ledger Account on the basis of FIFO method :
26.12.2018 : Issued 100 units 01.01.2018 Opening Stock 250 units @ Re. 1 each
28.12.2018 : Received 100 units @ Rs.10 per unit 03.01.2018 Purchased 100 units @ Re. 1.05 each
On 16th December, there was a shortage of 10 units. 04.01.2018 Purchased 200 units @ 1.05 each
[Closing stock of 535 units of Rs.5,001.25] 06.01.2018 Issued 400 units
10.01.2018 Purchased 400 units @ Rs.1.20 each
Q-32: A consignment consisted of two chemicals A and B. The invoices gave the 12.01.2018 Issued 150 units
following data : 13.01.2018 Issued 100 units
Chemicals A-4,000 lb. @ Rs.2.50 per lb..... Rs.10,000 16.01.2018 Purchased 100 units @ Re. 1.00 each
Chemicals B-3,200 lb. @ Rs.3.25 per lb..... Rs.10,400 22.01.2018 Purchased 200 units @ Rs.1.25 each
Sales Tax Rs.816 31.01.2018 Issued 300 Units
Railway Freight Rs.384 [Balance 100 units @ Re.1.00 and 200 units @ Rs.1.25; Total: Rs.250]
Total Cost Rs.21,600
A shortage of 200 lb. in A and 128 lb. in B was noticed due to breakage. What Illustration-7 (ICAI): M/s Tyrotubes trades in four wheeler tyres and tubes. It
stock rate you would adopt for pricing issues assuming a provision of 5% towards stocks sufficient quantity of tyres of almost every vehicle. In year end 20X1-X2,
further deterioration. the report of sales manager revealed that M/s Tyrotubes experienced stock-out
[Chemical A: Rs.2.93; Chemical B: Rs.3.76] of tyres.
The stock-out data is as follows :
Q-33: The purchases and issues of material X in the month of January, 2018 is a Stock-out of Tyres No. of times
follows : 100 2
Jan. 3 : Purchase 800 Units @ 20 per unit 80 5
Jan. 8 : Purchase 700 Units @ Rs.18 per unit 50 10
Jan. 9 : Issue 600 units 20 20
Jan. 11 : Issue 800 units 10 30
Jan. 17 : Purchase 800 units @, 20 per unit 0 33
Jan. 25 : Purchase 500 units @ Rs.25 per unit M/s Tyrotubes trades loses Rs.150 per unit due to stock-out and spends Rs.50
Jan. 31 : Issue 1,000 units per unit on carrying Inventory. Determine optimum safty stock level.
The standard price of material is 20 per unit fixed for the year 2018. Show the
Stores Ledger entries and determine the price variance for the month of January.
[Balance 400 units of Rs.9,100, Price Variance Rs.1,100 Adverse] ••••••••••••••••••••••

Q-34: From the following receipts and issues of material during the month of