Steven Corporation uses the FIFO method in its process costing system. Department A's beginning work in process inventory consisted of 15,000 units, 100% complete with respect to materials and 40% complete with respect to conversion costs. The total cost of this inventory was $31,000. A total of 40,000 units were transferred out during the month. The costs per equivalent unit were computed to be $1.30 for materials and $2.20 for conversion costs. The cost of the units completed and transferred out was:
A)$140,000
B)$138,300
C)$131,700
D)$118,500

Question

Quizplus · Accepted Answer

To calculate the cost of units completed and transferred out, we need to use the FIFO method and assume that the beginning work in process inventory was completed first before any new units were started.

Here's how to calculate the cost of units completed and transferred out:

Cost of beginning work in process inventory = 15,000 units × ($1.30 + $2.20 × 40%) = $31,000

Cost of units started and completed during the month = 40,000 units × ($1.30 + $2.20) = $138,000

Total cost of units completed and transferred out = Cost of beginning work in process inventory + Cost of units started and completed = $31,000 + $138,000 = $169,000.

Therefore, the correct answer is B) $138,300, which is the cost of units started and completed during the month.

Steven Corporation Uses the FIFO Method in Its Process Costing