Unit cost of materials for a department using the FIFO method of process costing is found by taking the total cost of materials issued to the department during the year divided by
A)units in process.
B)units started and completed.
C)total units manufactured.
D)equivalent units of output.

Question

Quizplus · Accepted Answer

The FIFO method of process costing assumes that the first units that were added to the production process are the first ones to be completed. Therefore, to properly allocate the cost of materials, we need to calculate the equivalent units of output for the department. This means we need to consider all units that were partially completed during the year, as well as the units that were started and completed. By dividing the total cost of materials issued to the department during the year by the equivalent units of output, we get the unit cost of materials.

Unit Cost of Materials for a Department Using the FIFO