Advantages and disadvantages of Periodic Simple Average Price Method

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Periodic Simple Average Price Method : This method is similar to Simple Average Price Method except that the average price is calculated at the end of the concerned period. In other words, the price paid during the period for different lots of materials purchased are added up and the total is divided by the number of purchases made during the period. The rate so computed is then used to price all the issues made during the period, and also for valuing the closing inventory of the period.

Advantages:

1. It is simple to operate, as it avoids calculation of issue price after every receipt.

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2. This method can usefully be employed in costing continuous processes where each individual order is absorbed into the general cost of producing large quantities of articles.

Disadvantages:

1. This method cannot be applied in jobbing industry where each individual job order is to be priced at each stage of its completion.

2. This method is unscientific as it does not take into consideration the quantities purchased at different prices.

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3. This method also suffers from all those disadvantages of simple average cost method.

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