Question

1. Which of the following is true of the first-in, first-out costing method?

a. It categorizes all units of inventory as units started and completed during the current period.

b. It recognizes that the work and costs carried over from the prior period belong to that period.

c. It includes the equivalent units and manufacturing costs in beginning work in process in the current period unit cost calculation.

d. It includes only direct materials cost in the unit cost of inventory of finished goods.

2. Which of the following is a disadvantage of the weighted average costing method?

a. It can be used only by manufacturing firms.

b. It combines the performance of the current period with that of a prior period

c. It does not consider units in BWIP while computing equivalent units of output

d. It increases the material costs of a firm significantly.

Answer 1

Option-(b): It recognizes that the work and costs carried over from the prior period belong to that period. Reason Under FIFO method, equivalent units would consist efforts required to complete the beginning inventory, efforts put for completed and transferred out goods and ending inventory. If the materials are introduced at the beginning itself, beginning inventory is 100% complete in terms of materials generally and so 0% efforts would be required in current process or period to complete the same. However, conversion re the uncompleted portion of costs in current process or is, if beginning inventory is complete by 80% already in terms of conversion, 20% efforts would be required in current period to complete the ly how much % of current pe to complete the same in current period. it s evidenced