Methods adopted to value raw material inventory control

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The following methods can be adopted to value the raw material:

• First-In-First-Out (FIFO): When a firm adopts the FIFO method to price its raw material, the issue of material from the stores will be in the order which it was received. Thus the pricing will be based on the cost of material that was obtained first.
• Last-In-First-Out (LIFO): In the LIFO method, the material issued will be priced based on the material that has been purchased recently.
• Weighted Average Cost Method: The pricing of materials will be alone on weighted average basis (weights will be given based on the quantity).
• Standard Price Method: Material is priced based on a standard cost, which is predetermined. When the material is purchased the stock account will be debited with the standard price. The difference between the purchase price and the standard price will be carried into a variance account.

Replacement / Current Price Method: In this method material is priced at the value that is realizable at the time of the issue.

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