Because the weighted average and FIFO methods treat beginning inventory differently, if a firm has beginning inventory in a process costing system and the FIFO method is used, it will:
A) Always have a higher number of equivalent units of production for conversion costs than weighted the average method
B) Always have a lower number of equivalent units of production for conversion costs than the weighted average method
C) Always have a higher cost per equivalent unit than the weighted average method for materials
D) Always have a lower cost per equivalent unit than the weighted average method for conversion costs

Question

Quizplus · Accepted Answer

Because the FIFO method assumes that the oldest units are completed and transferred out first, it will allocate more of the beginning inventory cost to the units completed and transferred out during the current period, meaning that fewer equivalent units of production will be assigned to conversion costs compared to the weighted average method.

Because the Weighted Average and FIFO Methods Treat Beginning Inventory