FIFO method (process costing)

The FIFO method in process costing costs opening work-in-process separately from units started and finished this period, rather than blending old and new costs like the weighted-average method.

ByHoang TruongUpdated July 5, 2026

See it move

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Under FIFO, equivalent units keep opening work-in-process separate from new production. Ferro Assembly's 200 opening-WIP units need 60 percent more conversion work, 120 equivalent units; 800 units are started and finished at 100 percent; and 200 closing-WIP units are 50 percent complete, 100 units. Together these give 1,020 equivalent units for conversion.

Where it fits

SubjectCost AccountingAdvancedTopicJob & Process CostingAdvanced

The formula

LaTeX

EU_{FIFO} = OWIP \times (1 - p_0) + SF + CWIP \times p_1

Variables

$O W I P$: Opening work-in-process units (units)
$p_{0}$: % complete of opening WIP carried forward from last period (%)
$S F$: Units started and finished this period (units)
$C W I P$: Closing work-in-process units (units)
$p_{1}$: % complete of closing WIP this period (%)

Costs opening work-in-process separately from units started and finished this period, unlike the weighted-average method.