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When comparing the two process costing methods for the same company, equivalent units computed under the FIFO method will always be less than or equal to equivalent units computed under the weighted-average method.
FIFO Method
"First In, First Out," an inventory valuation method where goods first added to inventory are the first ones to be sold.
Weighted-Average Method
A technique used in various contexts, such as inventory valuation and cost accounting, that calculates an average taking into account the proportionate importance of each component.
Equivalent Units
A concept in cost accounting used to allocate production costs between completed and partially completed goods.
- Review the procedure for calculating equivalent units of production following the FIFO method.
- Evaluate the differences between the First-In, First-Out (FIFO) method and the Weighted-Average method in managing and allocating costs.
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Learning Objectives
- Review the procedure for calculating equivalent units of production following the FIFO method.
- Evaluate the differences between the First-In, First-Out (FIFO) method and the Weighted-Average method in managing and allocating costs.
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