Question

Which of the following is true of the first-in, first-out (FIFO) costing method? a.It recognizes that the work and costs carried over from the prior period legitimately belong to that period. b.It includes only direct materials cost in the unit cost of inventory of finished goods. c.It categorizes all units of inventory as units started and completed during the current period. d.It includes the equivalent units and manufacturing costs in beginning work in process in the current period unit cost calculation.

Answer 1

Answer:

a.It recognizes that the work and costs carried over from the prior period legitimately belong to that period.

Explanation:

Under the FIFO method, all the units which are completed first are sold first. Basically it do not account for the opening work in progress as related to current year, rather it states the expenses related to previous period belong to that period only.

Thus, it states that the goods belonging to some previous period are because of expenses incurred in previous period.

Statement A which clearly states that the goods or work in process carried from previous period do belong to that period, and not to the current period .