FIFO Aluminum processes a single type of aluminum. During the current period the following information was given:

All materials are added at the beginning of the production process. The beginning inventory was 35% complete as to conversion, while the ending inventory was 40% completed for conversion purposes.
FIFO Aluminum uses the first-in, first-out system of process costing.
What were the costs assigned to the units transferred out this period (Round intermediary calculations to the nearest cent)?
A) $114,391
B) $118,203
C) $246,250
D) $153,004

Question

FIFO Aluminum processes a single type of aluminum. During the current period the following information was given:

All materials are added at the beginning of the production process. The beginning inventory was 35% complete as to conversion, while the ending inventory was 40% completed for conversion purposes.
FIFO Aluminum uses the first-in, first-out system of process costing.
What were the costs assigned to the units transferred out this period (Round intermediary calculations to the nearest cent)?
A) $114,391 
B) $118,203 
C) $246,250 
D) $153,004

Quizplus · Accepted Answer

To calculate the costs assigned to the units transferred out, we need to use the FIFO method to allocate the costs of the beginning inventory and the costs incurred during the period to the units completed and transferred out.

First, let's calculate the equivalent units of production for the current period:

Units started and completed: 80,000
Ending inventory (40% complete): 24,000

Total equivalent units of production: 104,000

Next, let's calculate the cost per equivalent unit by adding up the costs of the beginning inventory and the costs incurred during the period and dividing by the total equivalent units of production:

Beginning inventory costs: $94,000 
Costs incurred during the period: $326,130 
Total costs: $420,130

Cost per equivalent unit: $420,130 / 104,000 = $4.0386

Finally, we can calculate the costs assigned to the units transferred out by multiplying the number of units completed and transferred out (80,000) by the cost per equivalent unit:

Costs assigned to units transferred out: $4.0386 * 80,000 = $118,203 (rounded to the nearest cent)

Therefore, the best choice is B.

FIFO Aluminum Processes a Single Type of Aluminum