FIFO Method of Process Costing

The FIFO method of process costing calculates equivalent units and production costs differently from the weighted average method of process costing. In the FIFO method, the equivalent units are the equivalent units in the beginning inventory plus the units started and completed during the period (100 percent) plus the equivalent units in the ending inventory. Production costs to be accounted for are the costs added during the month. Cost per equivalent unit is the production cost divided by the equivalent units. Normally, a separate cost per equivalent unit is calculated for direct materials and conversion costs (labor and overhead). See also weighted average method of process costing.