If the cost of materials decreased from June to July, which of the following statements would be true? (Assume all other factors are held constant.)
A)Only the FIFO method would result in a decrease in the unit cost for July.
B)Only the weighted average method would result in a decrease in the unit cost for July.
C)Both the weighted average method and the FIFO method would result in a decrease in the unit cost for July; however, the FIFO method would result in a lower unit cost for units in July than the weighted average method.
D)Both the weighted average method and the FIFO method would result in a decrease in the unit cost for July; however, the weighted average method would result in a lower unit cost for units in July than the FIFO method.

Question

Quizplus · Accepted Answer

Both the FIFO (First-In, First-Out) and the weighted average methods would reflect a decrease in the unit cost for July if the cost of materials decreased, given all other factors are constant. However, because FIFO uses the oldest costs first, the decrease in material costs would be reflected more immediately in the unit cost of items produced or sold in July. The weighted average method, on the other hand, averages the costs of all units available for sale during the period, leading to a less pronounced decrease in unit cost for July compared to FIFO.

If the Cost of Materials Decreased from June to July