(Appendix 6A)If a company uses two different unit cost figures to cost transfers from one department to another under a process costing system,then which of the following statements is reasonable to assume?
A) There was no beginning work-in-process inventory.
B) Processing centres are arranged in a sequential pattern.
C) The FIFO cost method is being used.
D) The weighted-average cost method is being used.

Question

Quizplus · Accepted Answer

When a company uses two different unit cost figures to cost transfers from one department to another under a process costing system, it is reasonable to assume that the FIFO (First-In, First-Out) cost method is being used. This method separates the costs of the beginning inventory from the costs of the units started and completed during the current period, hence requiring different unit cost figures for these batches.

(Appendix 6A)If a Company Uses Two Different Unit Cost Figures