During September, the Filtering Department of Olive Company had beginning transferred in units of 400 units with costs of $80,000. During the month, 800 units were transferred in from the Milling Department with transferred in costs of $200,000. It had 400 units in ending Work-in-Process Inventory. What is the cost per equivalent unit of production for the transferred in units transferred to the Finishing Department in September under the first-in, first-out (FIFO)method?
A)$275 per equivalent unit of production for transferred in
B)$200 per equivalent unit of production for transferred in
C)$75 per equivalent unit of production for transferred in
D)$167 per equivalent unit of production for transferred in

Question

Quizplus · Accepted Answer

Under FIFO method, we assume that the units transferred out are from the beginning inventory first, and then from the units added during the current period in chronological order. Therefore, the cost of the beginning inventory is first assigned to the first units transferred out, and the cost of the units added during the period is assigned to the later units transferred out.

To calculate the cost per equivalent unit of production for transferred in units, we need to divide the total cost of transferred in units by the equivalent units of transferred in units.

Total cost of transferred in units = beginning transferred in costs + costs added during the period 
= $80,000 + $200,000 
= $280,000

Equivalent units of transferred in units = units added during the period 
= 800 units

Cost per equivalent unit of production for transferred in units = total cost of transferred in units ÷ equivalent units of transferred in units 
= $280,000 ÷ 800 units 
= $350 per unit

Therefore, the cost per equivalent unit of production for the transferred in units transferred to the Finishing Department in September under the FIFO method is $350 per unit, or $167 per equivalent unit of production (since there were 400 equivalent units of transferred in units).

The correct answer choice is D.

During September, the Filtering Department of Olive Company Had Beginning