A Disadvantage of the Weighted-Average Method Compared to the FIFO

question 25

Multiple Choice

A disadvantage of the weighted-average method compared to the FIFO process-costing method is that ________.

• A) FIFO is computationally simpler
• B) FIFO provides better management information for planning and control purposes
• C) when unit cost per input prices fluctuate markedly from month to month, its per unit cost is less representative than FIFO
• D) the information it provides about changes in unit prices from one period to the next is less useful than the information provided by FIFO

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Definitions:

Cash Receipts

The collection of money, including coins, currency, checks, and electronic payments, received by a business during a given period.

Inventory

The goods and materials that a business holds for the purpose of resale or production.

Accounts Payable

An accounting entry representing a company's obligation to pay off a short-term debt to its creditors or suppliers.

Cost of Goods Sold

Costs directly linked to the creation of goods that a company sells, encompassing both material and labor expenses.