If the Cost of Materials Increased from January to February

question 21

Multiple Choice

If the cost of materials increased from January to February and there is beginning inventory for each month, which of the following statements would be true? (Assume all other factors are held constant.)

• A)Only the weighted average method would result in an increase in the unit cost for February.
• B)Only the FIFO method would result in an increase in the unit cost for February.
• C)Both the weighted average method and the FIFO method would result in an increase in the unit cost for February; however, the weighted average method would result in a greater unit cost for units in February than the FIFO method.
• D)Both the weighted average method and the FIFO method would result in an increase in the unit cost for February; however, the FIFO method would result in a greater unit cost for units in February than the weighted average method.

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Definitions:

Processing Department

A unit or stage within a manufacturing operation where a particular process or set of processes is performed, transforming raw materials into finished products.

Equivalent Units

A measure used in cost accounting to express the amount of work done during a period in terms of fully completed units of output.

Processing Department

A division in a manufacturing operation where a specific major function or activity is performed consistently.

Equivalent Units

A concept used in cost accounting to convert partially completed goods into an equivalent number of fully completed units.