I am being confronted by this question by most of the organisations on Which is a better method of valuation, Is it FIFO (Actual Costing) or FTP (Standard Costing).
I tried to analyse and found out some of the basic differences between the two like:
1) Its the concern of most of the organisations that the number of financial transactions that should be generated in the finance should be minimum for better control, then its the FIFO which is better, the system does not generates the purchase price variance transactions in system.
2) Now, as we said above that purchase price variance transactions will not be generated, which is used by most of the organisations to control the performace of purchase department. So its the FTP which one should go ahead with.
3) Another requirement that is readily availability of inventory valuation in finance as per actual costs, if that is the requirement its only the FIFO one should go ahead with, you dont need to do the item valuation outside the system to arrive at the valuation on actual prices.
4) Same is for the valuation of finished goods and sub assemblies, the organisations requires the actual cost that has been incurred on the manufactured items and sub assemblies, which is only possible if we use the FIFO and not FTP where it would be only standard costs that would be applied on sub assemblies and FG.
These were some of the differences that I could find.
Comments and further addition to this is most invited.