Mullins Corporation uses the first-in, first-out method in its process costing system. Data concerning the first processing department for the most recent month are listed below: The total cost transferred from the first processing department to the next processing department during the month is closest to: (Round equivalent units to the nearest whole number and round all other intermediate calculations to 3 decimal places.)
A) $491,207
B) $579,123
C) $506,975
D) $540,675

Question

Mullins Corporation uses the first-in, first-out method in its process costing system. Data concerning the first processing department for the most recent month are listed below:  The total cost transferred from the first processing department to the next processing department during the month is closest to: (Round equivalent units to the nearest whole number and round all other intermediate calculations to 3 decimal places.)
A) $491,207 
B) $579,123 
C) $506,975 
D) $540,675

Quizplus · Accepted Answer

The total cost transferred from the first processing department to the next processing department can be calculated by adding the cost of completed units and the cost of partially completed units (ending work in process).

For completed units:
Equivalent units = number of units completed during the month × percentage of completion
Equivalent units = 36,000 × 100% = 36,000 units

Cost of completed units:
Cost of completed units = equivalent units × cost per unit
Cost of completed units = 36,000 × $12.75 = $459,000

For ending work in process:
Equivalent units = number of partially completed units × percentage of completion
Equivalent units = 12,000 × 60% = 7,200 units

Cost of ending work in process:
Cost of ending work in process = equivalent units × cost per unit
Cost of ending work in process = 7,200 × $14.75 = $106,560

Total cost transferred:
Total cost transferred = cost of completed units + cost of ending work in process
Total cost transferred = $459,000 + $106,560 = $565,560

Therefore, the closest answer is A) $491,207 (the only answer that is below $565,560).

Mullins Corporation Uses the First-In, First-Out Method in Its Process