Which of the following statements is true regarding the FIFO method of process costing?
A) It assumes that the units in beginning inventory were finished last during the current period.
B) It assumes that the units in beginning inventory were started in the current period.
C) It assumes that the units in beginning inventory were finished first during the current period.
D) It assumes that the units in beginning inventory were the same percentage complete as the ending inventory units.

Question

Quizplus · Accepted Answer

The FIFO (first-in, first-out) method of process costing assumes that the units in beginning inventory were finished first during the current period. This means that the costs associated with these units are transferred out of the production process before costs associated with units started in the current period. It is based on the assumption that the oldest units (first-in) are processed first and sold or transferred out of the process first (first-out) before any newer units are processed.

Which of the Following Statements Is True Regarding the FIFO