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 30% 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 equivalent unit cost to the nearest penny)?

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 30% 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 equivalent unit cost to the nearest penny)?

Quizplus · Accepted Answer

To calculate the cost assigned to units transferred out, we need to calculate the equivalent units of production for the period:

Equivalent Units of Production:
Units started during the period: 100%
Beginning inventory: 30%
Ending inventory: 40%
100% + 30% - 40% = 90% completed

Costs:
Beginning inventory:
30% x $40,000 = $12,000
Costs added:
$324,000
Total Costs:
$336,000

Equivalent Unit Cost:
$336,000 ÷ 9,000 EU = $37.33 per EU

Cost assigned to units transferred out:
6,000 EU x $37.33 per EU = $223,980

Therefore, the closest option to the calculated cost is option B, $113,236.

FIFO Aluminum Processes a Single Type of Aluminum