I understand that by calculating COGM, we need to calculate the direct materials used so on n so forth.

Direct materials used
Beginning raw materials inventory $ 6,200
Add: Cost of raw materials purchased 49,400
Total raw materials available 55,600
Less: Ending raw materials inventory (5,800)
Total raw materials used $ 49,800

The above shows how to calculate the direct materials used. My question goes like this, if I have opening stock 9000kg valued @ $6, closing stock 18000kg. Cost of raw materials purchased is $839,025. Estimated purchase price is @ $6.60. Therefore, how do I calculate the value of the closing stock? Do I use $6 or $6.60?

thanks

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Originally Posted by freakingpig21

I understand that by calculating COGM, we need to calculate the direct materials used so on n so forth.

Direct materials used
Beginning raw materials inventory $ 6,200
Add: Cost of raw materials purchased 49,400
Total raw materials available 55,600
Less: Ending raw materials inventory (5,800)
Total raw materials used $ 49,800

The above shows how to calculate the direct materials used. My question goes like this, if i have opening stock 9000kg valued @ $6, closing stock 18000kg. Cost of raw materials purchased is $839,025. Estimated purchase price is @ $6.60. Therefore, how do i calculate the value of the closing stock? do i use $6 or $6.60?

thanks

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Depends on valuation method applied:
FIFO - $6.60 using latest price
LIFO - $6.00 using earliest price
Average Calculate the values of opening inventory and purchases and divide it by the units at beginning + purchases. You get $6.56