FIFO and weighted average cost compared
The same boards give two different values. See which method shows more profit when prices rise, and when they fall.
Task 1The same boards, two answers3 questions
Both methods were used on the same oak boards in June. The boards and the prices paid were the same. Only the method differs.
| Figure | FIFO | Weighted average |
|---|---|---|
| Cost of boards issued | 2,410.00 | 2,430.00 |
| Closing inventory | 380.00 | 360.00 |
| Total | 2,790.00 | 2,790.00 |
The price of oak rose during June. FIFO issues the oldest, cheapest boards first, so the newest and dearest boards are left in the store.
Task 2When prices fall3 questions
Task 3Choosing a method3 questions