how do you calculate value of finished production in process costing when there is opening WIP?

Question

I cant understand the FIFO method or the weighted average method, I've got an exam in 4 hours. If someone could save me, 10 points guaranteed.

Answer 1

FIFO, as in First-in-First-out means, whatever came in first in your inventory should go out or use first. So lest's say in week 1 you received 20 units of raw material for $.10 each, in week 2 your received 10 units of the same material for $0.15 each and in week 3 you received 15 units of the same material for $0.08 cents.

At the end of the month you have 2 finished products; 1 finished on the 2nd week and 2nd product was finished on the 3rd week and both products used 25 units of above raw materials.

So, the cost of 1st product will 20 units at $0.10 plus 5 units at $0.15 cents totalling to $2.75

The 2nd product will then cost 5 units at $0.15 cents plus 20 units at $0.08 totalling to $2.35.

So how it really works is that, one item of the same products might cost lesser than the other and vise versa.

I hope this will help! Good luck to your exam!