Mastering Process Costing: Understanding the Correct Method for Calculating Costs per Equivalent Unit

Which of the following statements below regarding process costing is correct? a. The equivalent units in the ending work in process inventory will be the same under both the FIFO and the weighted-average methods of process costing. b. The FIFO method of process costing generally provides more current information than the weighted average method. c. Under the FIFO method, costs per equivalent unit will contain only costs from the current period. d. D.All of the above

D. All above

The correct statement regarding process costing is option C: under the FIFO method, costs per equivalent unit will contain only costs from the current period.

Explanation:

Process costing is a method used to determine the total cost of producing a product in a manufacturing environment where identical or similar products are produced in large quantities. The two methods used in process costing are the first-in, first-out (FIFO) method and the weighted-average method.

In the FIFO method, the costs of the first unit completed are transferred to the next stage of production, and the cost of the last unit completed is assigned to the ending work in process inventory. The costs per equivalent unit under this method will contain only costs from the current period. Hence, option C is correct.

Option A is incorrect because the equivalent units in the ending work in process inventory will be different under the FIFO and the weighted-average methods.

Option B is incorrect because the FIFO method does not necessarily provide more current information than the weighted-average method. It depends on the specific circumstances of the manufacturing process.

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