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Explain the difference between simple average method and weighted average method?
Answer:
Under Simple average method the simple average of the prices of the lots available for making the issues is considered for pricing the issues. After the receipt of new lot, a new average price is worked out. This method is suitable if the material is received in uniform quantity.
Under Weighted average method the price of each lot and the quantity of the same is considered. This method proves to be very useful in the event of varying prices and quantities. It is very simple to calculate.
Under Weighted average method the price of each lot and the quantity of the same is considered. This method proves to be very useful in the event of varying prices and quantities. It is very simple to calculate.
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