Question

The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method:
a. does not consider the degree of completion of beginning work in process inventory when computing equivalent units of production.
b. considers ending work in process inventory to be fully complete.
c. will always yield a higher cost per equivalent unit.
d. All of the choices are correct.

Answer 1

The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method does not consider the degree of completion of beginning work in process inventory when computing equivalent units of production.

Explanation:

The cost of the process is the distribution of production costs to the units of output. The key difference between the FIFO and the weighted average approach is the handling of the inventory of started work-in-process or unfinished products.

The weighted average approach incorporates this inventory computing process costs, although it is kept separate by the FIFO approach. In the weighted average process costing system, the cost is measured and applied equally to all passed out units and units in the process of closing work.