Unit costs of the weighted-average and FIFO methods will differ significantly when

Question

Quizplus · Accepted Answer

The weighted-average and FIFO methods will differ significantly when there are large variations in direct materials or conversion costs per unit, and when physical inventory levels of work-in-process are large relative to the number of units transferred out. This is because the FIFO method accounts for the most recent costs, which can vary significantly from the average costs calculated in the weighted-average method under these conditions.

Unit Costs of the Weighted-Average and FIFO Methods Will Differ