Question

The units transferred in from the first department to the second department should be included in the computation of the equivalent units for the second department under which of the following methods of process costing?

FIFO Weighted-Average
a. Yes Yes
b. Yes No
c. No Yes
d. No No

Answer 1

Answer:

A. Yes Yes

Explanation:FIFO(FIRST IN FIRST OUT) this is a terminology used in accounting, Quality assurance/Food safety and stock management to control the receiving and usage,transfer or sale of goods,raw materials,spare parts etc. It is aimed at ensuring that products are used or sold according to the time it was received.

It is a method of determining the arithmetic mean of a set of data,or the average weight of a set of materials because some of the data or materials weigh more than the other. It is applied in materials and stock management to ensure that proper stock value is obtained when valuing the total amount of materials or stock received.

Answer 2

FIFO and Weighted-Average methods of process costing support inclusion of transferred units between two departments as a computation of the equivalent units for the second department.

• FIFO serves as inventory valuation method which involves selling out first purchased goods before others.

• Weighted average method serves as evaluation method for average inventory levels used in calculation of inventory value.

Therefore, option A is correct.

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