# Valuation of Closing Finished Goods
When opening and current-period finished goods have different costs per unit, the value of closing FG depends on the assumed flow of goods. The same data gives three different answers.
## Common Data
- Cost of Production (current period): ₹10,00,000 for 10,000 units → ₹100/unit
- Opening Stock: ₹10,00,000 for 8,000 units → ₹125/unit
- Units Sold: 11,000 units
- Total available = 8,000 + 10,000 = 18,000; Closing Stock = 18,000 − 11,000 = 7,000 units
## I. FIFO Method (Opening stock sold first)
If opening stock (8,000) is sold first, the remaining 3,000 sold come from current production. The 7,000 units of closing stock are fully out of current production (₹100/unit):
$$\text{Closing FG} = \frac{₹10,00,000}{10,000\text{ units}} \times 7,000 = ₹7,00,000$$
## II. LIFO Method (Current production sold first)
If current production (10,000) is sold first, the remaining 1,000 sold come from opening stock. The 7,000 units of closing stock are fully out of opening stock (₹125/unit):
$$\text{Closing FG} = \frac{₹10,00,000}{8,000\text{ units}} \times 7,000 = ₹8,75,000$$
## III. Weighted Average Method (Combined mix sold)
Pool all units and value at a single average rate:
| Rate/unit | Units | Total | |
|---|---|---|---|
| COP | ₹100 | 10,000 | ₹10,00,000 |
| Opening Stock | ₹125 | 8,000 | ₹10,00,000 |
| Total | 18,000 | ₹20,00,000 |
$$\text{Weighted Avg Rate} = \frac{₹20,00,000}{18,000} = ₹111.11/\text{unit}$$
$$\text{Closing FG} = ₹111.11 \times 7,000 = ₹7,77,778$$
## Summary of Results
| Method | Closing FG Value |
|---|---|
| FIFO | ₹7,00,000 |
| LIFO | ₹8,75,000 |
| Weighted Average | ₹7,77,778 |
> Insight: Here opening stock (₹125) is dearer than current production (₹100). FIFO leaves the cheaper recent units in closing stock (lowest value); LIFO leaves the dearer old units in closing stock (highest value); Weighted Average sits in between.