If changes occur in the prices of the manufacturing inputs from one period to the next,then FIFO produces a more accurate unit cost than does the weighted average method.

Question

Quizplus · Accepted Answer

This is because FIFO assumes that the first items purchased are the first ones sold, which matches the actual flow of costs better when prices are increasing. In contrast, the weighted average method blends all the costs together to arrive at a single average cost, which may not reflect the specific prices of the inputs in a given period.

If Changes Occur in the Prices of the Manufacturing Inputs