In which circumstance is the FIFO method more likely to be preferred in determining the costs of processing?

A) staff in the accounting department lack expertise and experience in costing.
B) there are regularly little work-in-process inventories on hand.
C) there are never any work-in-process inventories on hand.
D) there are regularly substantial work-in-process inventories on hand.

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Charles Gauthier · Accepted Answer

Final Answer : D, Explanation :  The FIFO method is more likely to be preferred when there are regularly substantial work-in-process inventories on hand. This is because FIFO assumes that the first units produced are the first ones to be sold or used, which aligns with the physical flow of goods in a situation where there are significant amounts of work-in-process inventory. In contrast, when there are little to no work-in-process inventories, other costing methods such as LIFO or average costing may be more appropriate. Lack of expertise in costing would not necessarily determine the choice of costing method.

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