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Part $1$

$"$There$\text{'}$s no reason for me to get excited about the choice between the$$ weighted$-$average and FIFO methods in my$$ process$-$costing system. I have$$ long$-$term contracts with my materials suppliers at fixed$$ prices." Do you agree with this statement made by a plant$$ controller? Explain. $($Select all that$$ apply.$)$

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Part $1$

A$.$

$$No$,$ I do not agree with the statement. What the plant controller is not considering is the amount of inventory on hand at the beginning or end of an accounting period. The smaller the amount of production held in beginning or ending inventory relative to the total number of units transferred$$ out, the smaller the effect on operating$$ income, cost of goods$$ sold, or inventory amounts from the use of either the$$ weighted$-$average or the FIFO methods.

B$.$

$$No$,$ I do not agree with the statement. Material purchases are only one cost item. Other$$ items, such as$$ labor, energy, and$$ maintenance, are often included in a conversion costs pool. If the costs of these items vary over$$ time, the choice of inventory method$($weighted average or$$ FIFO$)$ could have an impact on cost of goods sold and inventory amounts.

C$.$

$$Yes$,$ I agree with the statement. In a$$ process$-$costing system, direct materials are the only costs which affect operating$$ income, cost of goods sold or inventory. Since the costs will remain consistent as a result of the$$ long$-$term contracts with$$ suppliers, the cost per unit under either the$$ weighted$-$average or the FIFO methods will be the same.

D$.$

$$Yes$,$ I agree with the statement. There is no need to consider other$$ costs, such as$$ labor, energy, or maintenance. If the costs of these items vary over$$ time, the choice of inventory method$($weighted average or$$ FIFO$)$ has no impact on operating$$ income, cost of goods sold or inventory amounts.