Simple and Weighted Average - Material Issues
Stores Ledger – Material Issue Pricing Methods When materials are purchased at different prices , the Stores Ledger needs a method to determine the price at which materials issued to production are valued. Two important methods are: Simple Average Price Method Weighted Average Price Method 1. Simple Average Price Method Meaning Under the Simple Average Price Method , the issue price is calculated by taking the arithmetic average of the different purchase prices, without considering the quantities purchased at each price . Formula Procedure Step 1: Identify all the different prices available in stock. Step 2: Add the prices. Step 3: Divide the total by the number of prices. Step 4: Use the resulting average price to value the material issue. 2. Weighted Average Price Method Meaning Under the Weighted Average Price Method , the issue price is calculated by considering both the quantity and price of materials available in stock. It ...