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Study Material Chinchu
Study Material Chinchu
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any other appropriate method. As this method aims at matching current
costs to current sales, the LIFO Method will be most suitable for valuing
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stock of materials other than the base stock. The base stock method has
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• Under this method materials issued are charged at the rate of highest
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material at that highest price is exhausted, after which the next highest
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price is used. Thus, in HIFO method, the production absorbs the high
cost of materials and closing stock is valued at lower rates.
• The HIFO method has the advantage that in fluctuating market, the
highest cost of materials is recovered first and inventory valuation is
kept at the lowest which is tantamount to creating a secrete reserve.
This method is not popular but is used ‘cost plus contracts’ with
advantage.
• Suitability:
• This method is suitable for pricing of materials issued to cost plus
contracts and monopoly products. But today, this method is not popular
and it is not adopted widely.
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