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FIFO process costing

FIFO process costing separates current-period work from work already performed in opening work in progress. Equivalent units include work needed this period to finish opening units, units started and completed this period, and work performed on closing units. Current-period costs are divided by the appropriate current-period equivalent units. This is deeper process-costing background and must not be confused with the FIFO assumption for issuing materials from stores.

Worked example

Opening work in progress has 100 units that are 60% converted. Finishing them this period requires 40 equivalent conversion units, not 100, before adding other current-period work.

Common mistake

Do not include the opening units’ previously completed work again in current-period equivalent output.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA MA Supporting September 2026–June 2027
FIA FMA Supporting September 2026–June 2027