Pricing Methods of Material Issued

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 27, 2023

In a manufacturing concern, there are different approaches to valuing or pricing materials issued for production.

The exact method used usually depends on the nature of the materials and the nature of the business itself.

Whichever method of pricing materials issued is followed, the actual issue of materials will always be recorded from the earliest consignment.

The main methods used to price materials issued are:

  • Market Price Method
  • Average Price Method
  • Fixed Price Method
  • Inflated Price Method
  • Base Stock Method

Choosing a Pricing Method For Materials Issued

Selecting a method for pricing materials issued cannot be done by following a formula. The choice depends on considering multiple factors, including:

  • The nature of production (intermittent or continuous)
  • Volume/frequency of receipts of materials
  • Variations and fluctuations in price and their nature
  • Frequency of issues of material
  • Stock turnover rate
  • Effect of pricing method on tax payable
  • Clerical labor involved in the method
  • Traceability of the issue to the particular lot or consignment

Pricing Methods of Material Issued FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.