CAF-5 · Chapter 7 · Question 7 of 10
Under the First-In-First-Out (FIFO) method of process costing, how are the equivalent units for opening Work-in-Progress (WIP) calculated for the current period?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) By taking the total units of opening WIP multiplied by the percentage of work required to finish them in the current period.
Explanation
Under the FIFO method, the cost valuation distinguishes between items started in the previous period and finished in the current period. The equivalent units for opening WIP only account for the work needed to finish the units in the current period.
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