Operating profit can differ materially between the results for the weighted-average and FIFO methods when:

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Under the weighted-average method, the cost of goods sold is calculated by using the weighted average of the cost of all units in inventory, whereas under the FIFO method, the cost of goods sold is calculated by using the cost of the oldest units in inventory first. Therefore, when there are significant variations in direct materials or conversion costs per unit from period to period, the use of either method can result in a material difference in operating profit. Additionally, when the physical inventory levels of work in process are large relative to the total number of units transferred out, the use of the FIFO method may result in a higher cost of goods sold and a lower operating profit due to the higher cost of the oldest units being used in the calculation.

Operating Profit Can Differ Materially Between the Results for the Weighted-Average