The cost of units completed can differ materially between the weighted-average and the FIFO (first-in,first-out)methods of process costing.

Question

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The weighted-average method combines the costs of beginning work in process inventory with the costs of current production to determine the cost per equivalent unit. The FIFO method assumes that the costs of the earliest units worked on are the first to be transferred out, resulting in a different cost per equivalent unit than the weighted-average method. Therefore, the cost of units completed can differ materially between the two methods.

The Cost of Units Completed Can Differ Materially Between the Weighted-Average