Under the first-in-first-out method, the earliest costs (first costs) are assigned to the cost of goods sold, and the remaining costs (the more recent costs) are assigned to the ending inventory. The FIFO method assumes that the earliest goods purchased are sold first. But in practice, it is not followed strictly, i.e., the earliest goods…
Operating Costing is a method of ascertaining the costs of providing or operating a service. This costing method is applied by undertakings that provide services rather than the production of goods. Such undertakings, for example, are; transport concerns, gas agencies; electricity suppliers; hospitals; theatres, etc. Because of the varied nature of activities carried out by…
The economic order quantity (EOQ) is the purchase order’s size, giving maximum economy in purchasing material. It is also termed a standard order quantity. The concept of Economic Order Quantity or EOQ emerged from this behavior of carrying and ordering costs. EOQ is the quantity fixed at a point where the total cost of ordering…
What is Stock Control Card? Stock levels are maintained so there is no overstocking so that chances of loss through damage, deterioration quality, risk of obsolescence, etc., are avoided, along with unnecessary blocking of capital or paying interest on borrowed funds. At the same time, there shall be no stock-out situation, leading to interruption of…
Materials form an important part of the cost of a product. Therefore, proper control over material is necessary from when orders are placed with the suppliers until they are consumed in plant and office operations or sold as merchandise. An efficient system of materials control will lead to a significant reduction in production costs. Control…
The last in, first out method (LIFO) is the reverse of the FIFO method. Under the LIFO method, the earliest costs are assigned to ending inventory, and the costs of the most recent purchases are assigned to the cost of goods sold. The LIFO method assumes that the latest goods purchased are to be sold…