Tokyo manufacturing company produce a product in two manufacturing department Moulding and finishing department. The product is moulded out of plastic in the Moulding Department and then transferred to finishing department, where parts are added to the moulded plastic unit. Because only one product is manufactured by the company, a process cost system is used with FIFO cost assumption.

Data related to August operation in the moulding department are: Beginning inventory

Added this period

39,980 12638 18,779

Costs are charge to department: Material

Labour

Factory overhead

4120 522 961

During the period 9200 units were transferred from the moulding department to the finishing department. The moulding department had 1000 unit still in the process in at the end of the july; they were 100% as to material and 40% complete as to conversion cost. The moulding department had 800 units still in process at the end of the August; they were 75% complete as to material and 25% complete as to conversion cost.

Required:

Please justify how the changes from average cost method to FIFO method can affect the cost of production report.