The First-In,first-Out (FIFO)method Creates Better Month-To-Month Cost Comparisons Than the Weighted-Average

question 51

Multiple Choice

The first-in,first-out (FIFO) method creates better month-to-month cost comparisons than the weighted-average method ________.

• A) because it does not recognize transferred in units from other processes
• B) when there are substantial quantities of units in process at the end of the period
• C) because it merges costs from the prior period with the current period
• D) because it is used by industries that do not experience significant cost changes

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Definitions:

Standard Hours

The predetermined amount of time expected to complete a task or to produce a unit of output under normal conditions.

Standard Variable Overhead Rate

The predetermined rate at which variable overhead costs are expected to be incurred relative to a certain measure of activity, such as labor hours.

Direct Labour Hours

Direct Labour Hours represent the amount of time spent by workers directly involved in manufacturing a product or providing a service.

Variable Overhead

Indirect operating costs that change in proportion to the level of production or business activity.