Contents
Next-in-first-out (NIFO) Method
Under Next-in-first-out (NIFO) method, the issues are priced at the purchased rates of materials which are yet to arrive In simple words, the material rates which have been agreed upon by the supplier is used for issue purpose, though materials are not physically received.
In Meaning of NIFO Method material are issued at the price at which a new order has been placed and this price will hold good for all future issues until a next order is places As this method is somewhat complicated it is not normally adopted.
This NIFO method can be exploded with the help of an example, Suppose. in stock there are two batches of materials, one at Rs 45 and the other at Rs. 46.
Also Read – HIFO method of inventory valuation |Advantages, Disadvantages
There is a further batch of materials on order at Rs 48.50 which has not yet been received. If materials were to be issued now, these will be charged at Rs 48 50 The main argument in favor of this method is that this is a more up-to date replacement price than under LIFO method.
NIFO Full Form – Next-in-first-out
Advantages of NIFO
The chief advantage of this method is that, under this production method, the materials cost charged to production comes very close to current market price.
Also Read – What is LIFO method | Advantages and Disadvantages
Disadvantages of NIFO
The chief drawbacks of this method are.
1. Under this method calculations become difficult.
2. This method becomes impracticable, when the price of the consignment ordered at the time of issue but not yet received is not known in advance.
Also Read – What is LIFO method | Advantages and Disadvantages
3. Difficulty may also arise if the committed price of the next consignment ordered at the time of the issue, but not yet received is changed later at the time of actual delivery and payment for some reason or the other.
Suitability – This method is no doubt, a forward looking method. But it becomes impracticable in many cases, so it is rarely in use.
Related Links
- Meaning of Cost Accounting | Nature and Scope of Cost Accounting
- Cost Accounting | Purpose or Functions of Cost Accounting
- Advantages and Disadvantages of Cost Accounting
- Difference between Cost Accounting and Management Accounting
- What is Cost Concepts and Different Terms of Costs
- What is concept of Cost Audit | Objective and Scope of Cost Audit
- Advantages and Disadvantages of Cost Audit
- Meaning of Methods of Cost | Basic Methods of Costing
- What is meaning of Classification of Cost & elements of Cost | rules of Cost Accounting Standard
- What is Installation of a Costing System | Conditions and Factors
- What are the practical difficulties in installing cost accounting
- What is technique of Costing | Various techniques of Costing
- What is Material or Inventory Control | Techniques of Materials Control
- What is FIFO Method | advantages and disadvantages
- What is LIFO method | Advantages and Disadvantages
- What is Periodical or Annual Inventory Control System | Limitations
- Methods of Pricing Material Issues | Cost Methods
- What is Cost of Labour Turnover | Causes, Effects Classification
- What is meant by idle time | Definition, Causes, Control
- What is meaning of overtime work | Reason, Disadvantages
- HIFO method of inventory valuation |Advantages, Disadvantages
- What is two Bin System | Meaning of Bin Card and Specimen
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