Answer (C) is correct . Under FIFO, goods started last period and completed this period are differentiated from goods started and completed this period. The goods started last period but completed this period include the costs from last period as well as this period’s costs to complete, whereas goods started and completed this period only include current costs. In the weighted-average method, the costs of the prior and current periods are averaged. When the goods are transferred to the next department or to finished goods under FIFO, however, they are considered transferred out at one average cost so that a multitude of layers of inventory is not created. This procedure is consistent with the basic concept of process costing.
Answer (A) is incorrect because If the cost of goods started last period and completed this period and the cost of goods started and completed this period are kept separate, separate layers will continue to multiply as the units of product are passed through additional WIP accounts. Thus, these costs are combined before transfer to the next department.
Answer (B) is incorrect because If the cost of goods started last period and completed this period and the cost of goods started and completed this period are kept separate, separate layers will continue to multiply as the units of product are passed through additional WIP accounts. Thus, these costs are combined before transfer to the next department.
Answer (D) is incorrect because Under FIFO, the goods that were started last period and completed this period are deemed to be completed first and transferred first.
|
