Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 11

From the standpoint of cost control, why is the FIFO method superior to the weighted-average method? Is it possible to monitor cost trends using the weighted-average method?

Step 1 of 3

FIFO method of process costing:

Under FIFO method cost that is incurred in the current period is only taken into account for the purpose of calculation of manufacturing cost.

Weighted Average method of process costing:

Under weighted average method of process costing prior period cost of work in progress inventory is also taken into account.