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Which of the following would provide a higher cost per unit? A. Weighted average would always...

Which of the following would provide a higher cost per unit?

A. Weighted average would always provide a higher cost per unit because it includes all costs to date.

B. FIFO would always result in a higher cost per unit because it only includes the costs from this period.

C. FIFO would result in a higher cost per unit in times of rising prices.

D. FIFO would result ion a higher cost per unit in times of decreasing prices.
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Answer #1

The correct option is D. FIFO would result ion a higher cost per unit in times of decreasing prices.

Explanation:

Weighted average method provides an average cost per unit because the cost of goods sold is divided by the available for sale units. FIFO, on the other hand, uses the cost flow assumption that the units purchased first are moved out first. At times, when the prices are decreasing, the most recent units are purchased at lower costs than the units purchased earlier. Accordingly, highest unit cost is available under FIFO when the prices are decreasing.

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