# FIFO vs Weighted Average in Process Costing
When both opening WIP and closing WIP exist, the cost per equivalent unit can be computed under two methods.
## Conceptual Difference
| FIFO Method | Weighted Average Method |
|---|---|
| Units produced earlier are sold first — opening WIP is completed and transferred first. | No concept of first-in / first-out. Total cost ÷ Total equivalent units gives the average cost. |
## FIFO Method — Steps
1. Complete the opening WIP first using current period inputs to convert it into finished goods.
2. From the balance of current production, prepare the normal Process A/c.
3. In the statement of evaluation, add the value of opening WIP brought forward to the cost of the units used to complete that opening WIP.
## Weighted Average Method — Steps
1. Prepare a normal Process A/c without distinguishing old and new units.
2. Cost of each factor = Cost of Opening WIP + Current Period Cost for that factor.
3. Calculate per-unit rate of each factor and apportion proportionately.
## Treatment of Units Received from a Previous Department
> If the question states that units have been received from a previous department, those units are also material for the current process and 100% work is already done on them (for the material/cost transferred-in component).
## Input–Output Equation
The fundamental balance for every process:
```
Opening WIP + RM introduced = FG + Closing WIP + Normal Loss + Abnormal Loss
```
Abnormal gain reduces from the LHS or appears with a negative sign on the RHS.