Final answer:
In FIFO process costing, only current period costs are considered when computing the manufacturing cost per equivalent unit of production (EUP), excluding the cost of beginning WIP.
Step-by-step explanation:
When computing the current period's manufacturing cost per equivalent unit of production (EUP), using the FIFO method of process costing, the correct answer to whether the costs consider only current period costs, include the cost of beginning work-in-process (WIP), include less the cost of beginning WIP, or include the cost of ending WIP is Option 1: Only current period costs. The FIFO method (First-In, First-Out) focuses on the costs associated with the current period, excluding the costs of beginning work-in-process, which would have been factored into previous periods' calculations. Consequently, previous period costs, the beginning WIP, are not part of the current period's cost calculation in FIFO process costing.
An example to illustrate FIFO can consider various technologies with different costs components. For instance, Example A shows that with wages at $40 and machine costs at $80, technology 1 is the low-cost production technology. As wages increase, the firm may switch to a different technology that becomes more cost-effective, demonstrating how the choice of technology affects the average total cost. The average total cost is calculated by dividing total cost by total output at each level of output—reflecting U-shaped average costs when graphed. Firms will earn profits if their average cost of production remains below the market price.