In January, one of the processing departments at Sessum Corporation had beginning work in process inventory of $17,000. During the month, $172,000 of costs were added to production and the cost of units transferred out from the department was $178,000. The company uses the FIFO method in its process costing system.
-In the department's cost reconciliation report for January, the cost of ending work in process inventory would be:
A) $17,000
B) $5,000
C) $11,000
D) $23,000

Question

Quizplus · Accepted Answer

Using the FIFO method, we assume that the units completed and transferred out are those that were started first (i.e., the beginning inventory). Therefore, the cost of units transferred out equals the cost of the beginning inventory ($17,000) plus the cost added during the period ($172,000). This gives us a total cost of $189,000 for units completed and transferred out.

To calculate the cost of ending work in process inventory, we need to subtract the cost of units completed from the total cost accounted for in the department during the month ($17,000 beginning inventory + $172,000 added cost + cost of ending work in process inventory).

$189,000 (cost of units transferred out) = $17,000 (beginning inventory) + $172,000 (added cost) + cost of ending work in process inventory
Cost of ending work in process inventory = $189,000 - $17,000 - $172,000
Cost of ending work in process inventory = $11,000

Therefore, the answer is C) $11,000.

In January, One of the Processing Departments at Sessum Corporation