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FIFO, LIFO, AVCO HANDBOOK £25.49
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FIFO, LIFO, AVCO HANDBOOK

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This is a handbook breaking down the stock control process into First in First out, last in first out, and average cost.

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  • September 29, 2024
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bethanykernaghan
Valuation Methods Handbook

FIFO assumes that issues will be made from the oldest stock available, leaving the
latest purchases in stock
LIFO assumes that issues will be made from the newest stock available, leaving the
earliest purchases in stock.

AVCO assumes that you use an average cost of all the units you have in stock.

Example - Sid makes the following purchases and issue of Component X

Receipts Issues Balance
Date Reference Quantity Cost Total Quantity Cost Total Quantity Cost Total
per cost £ per cost per cost
unit £ unit £ unit £
£ £
10.0 50 1.00 50 50 1.00 50
1
20.01 60 1.10 66 110 116
30.01 40 1.25 50 150 166
31.0 60 90
1



Calculate the value of closing stock and the cost of stock issued to production using:
a) a FIFO
b) a LIFO
c) AVCO

Solution

a) FIFO - The 60 units issued will comprise:
£
50 units purchased 10 January @ £1.00 50
Balance of 10 units purchased 20 January @ £1.10 11
Cost of stock issued to production 61
Therefore closing stock on 31 January will comprise:
£
Balance of 50 units purchased 20 January @ £1.10 55
40 units purchased 30 January @ £1.25 50
Value of closing stock 31 January 105

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