Question

Weighted average and FIFO equivalent units will be equal in the event that beginning WIP is equal to zero. Absent the adjustments for beginning inventory, the FIFO and weighted average computations of equivalent units is identical. True or False?

Answer 1

The statement is true; when there is no beginning work in process, the weighted average and FIFO equivalent units will be equal because both methods will only account for costs incurred in the current period.

Step-by-step explanation:

The statement that the weighted average and FIFO (First-In, First-Out) equivalent units will be equal when beginning work in process (WIP) is zero is true. In cost accounting, the weighted average method combines the costs of beginning inventory with the costs of current period production, and this cost is then spread out across total units. However, if there is no beginning inventory, there are no prior costs to combine with the costs of the current period. Therefore, both FIFO and weighted average methods will consider only the costs incurred during the current period when calculating equivalent units.

Under FIFO, costs are tracked in the order they are incurred. When there is no beginning inventory, FIFO's first costs will be the same as the only costs present in the weighted average method, thus leading to equivalent units being the same. This equivalence only holds true when there is no beginning WIP, as FIFO otherwise separates the costs of beginning inventory from those incurred in the current period.