A major difference between FIFO and average costing is:
A)The number of equivalent units in ending work in process.
B)It is not possible to use FIFO when there is more than one department.
C)FIFO separates beginning inventory from current production.
D)The current month's cost of production will be less.

Question

Quizplus · Accepted Answer

The major difference between FIFO and average costing is that FIFO separates beginning inventory from current production, while average costing blends all costs together to calculate an average cost per unit. This means that under FIFO, the cost of goods sold reflects the cost of the oldest inventory first, while under average costing, the cost of goods sold reflects a blend of all inventory costs. Options A and D are not necessarily true for all cases, and option B is incorrect as FIFO can be used in multiple departments.

A Major Difference Between FIFO and Average Costing Is