In the monthly average costing method, the closing value of each month will be treated as opening for the next month.
In the above illustration, the rate (highlighted) is derived as below:
Closing rate= Total inward value/total inward quantity.
April month: 47500/200= 237.50
Consumption is derived as below for April month:
Outward quantity * closing rate as on that date.
Example: On 4-4-2015: 50*100= 5000 (consumption)
Gross profit = Value- Consumption
i.e 125000-5000= 120000
Gross profit percentage = Gross profit/value*100
120000/125000*100= 96.00%.
The closing rate is derived as below for May:
Formula:
Closing rate= Total inward value/total inward quantity.
55750/290= 192.2414 or 192.24
55750 comprises of last month’s closing value (treated as opening) + this month inward.
55750= 332520+22500
Where rate = 55750/290 = 192.24
Consumption is derived as below for May:
Outward quantity * closing rate as on that date.
Example: 11-5-2015 : 90*192.2414= 17301.726 or 17301.72 (consumption)
Gross profit = Value- Consumption
243000-17301.72=225698.28
Gross profit percentage = Gross profit/value*100
225698.28/243000*100=92.88%.
When you see the report as a whole, the same will be shown as below:
The total Consumption is derived from the below formula:
Opening Value + Inward Value – Closing Value
i.e. 70000-38448.27= 31551.73.
Gross profit = Value- Consumption
394000-31551.73= 362448.27