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Managerial Accounting

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Advantage of FIFO Process Costing

MGRACT-DQ1EEH

One of the major advantages of using FIFO method instead of weighted-average method with process costing is that:

A

The computation of cost per equivalent unit is less complicated with FIFO method.

B

FIFO method is an acceptable GAAP method while weighted-average is not.

C

In periods of rising prices, FIFO will lower operating income and therefore tax payments.

D

FIFO preserves cost layers for individual periods.