The closer a company moves towards Just in Time production, the differences in unit costs between average costing and FIFO will be reduced.

Question

Quizplus · Accepted Answer

Just in Time (JIT) production involves producing goods only when they are needed, thereby reducing inventory costs. Since JIT involves producing goods in smaller batches, FIFO (First In First Out) method of costing becomes less relevant because there is less likelihood of inventory buildup. This means that the differences in unit costs between average costing and FIFO will be reduced as the company moves more towards JIT.

The Closer a Company Moves Towards Just in Time Production