Which of the following is true when computing cost per equivalent unit in a FIFO process costing system?
A) Prior period costs are combined with costs incurred in the current period and then divided by the equivalent units of production.
B) Costs incurred in the current period are divided by the equivalent units of production.
C) Total cost to account for is divided by the equivalent units of production.
D) Equivalent units of production are divided by costs incurred in the current period.
E) Equivalent units of production are divided by cost to account for.

Question

Quizplus · Accepted Answer

In a FIFO process costing system, costs are assigned to units based on the order they are completed, with the first-in units being assigned the costs incurred in the prior period and the costs incurred in the current period being assigned to the units completed later. Therefore, when computing cost per equivalent unit, only costs incurred in the current period should be used, as they are the costs assigned to the units completed in the current period. The equivalent units of production represent the number of partially completed units that are equivalent to a certain number of fully completed units, and they should be used as the denominator in the cost per equivalent unit calculation. Therefore, option B is the correct answer.

Which of the Following Is True When Computing Cost Per