A Major Advantage of Using the FIFO Process-Costing Method Is

question 61

Multiple Choice

A major advantage of using the FIFO process-costing method is that:

• A) FIFO makes the unit cost calculations simpler
• B) in contrast with the weighted-average method, FIFO is considered GAAP
• C) FIFO provides managers with information about changes in the costs per unit from one period to the next
• D) in the period of rising prices, it leads to lower operating income and lower tax payments, saving the company cash and increasing the company's value

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Definitions:

ATC (Average Total Cost)

The per unit cost of production, calculated by dividing the total cost by the quantity of output produced.

MC (Marginal Cost)

The additional expense associated with the production of one more unit of a product or service.

Take a Loss

To realize a financial loss on an investment or transaction, often as a result of selling assets for less than their purchase price.

Short Run

A period in economics during which at least one input (e.g., factory size) is fixed and cannot be changed.