Zuniga Ltd uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040. Direct materials are added at the beginning of the process. Additionally: Using the FIFO method, the cost of the beginning work in process units transferred out was
A) $2,385
B) $15,476
C) $7,551
D) $6,756

Question

Quizplus · Accepted Answer

The cost of the beginning work in process units transferred out can be calculated as follows:
Cost of beginning work in process = (Equivalent Units of Production * Cost per Equivalent Unit) - Cost of units completed in current period
- Equivalent Units of Production of beginning work in process = 800 units (given)
- Cost per Equivalent Unit = Cost of beginning work in process / Equivalent units of production of beginning work in process
= $20,000 / 800 units
= $25 per unit
- Cost of units completed in current period = 550 units transferred out (given) * $25 per unit
= $13,750
- Cost of beginning work in process units transferred out = (800 units - 550 units) * $25 per unit
= 250 units * $25 per unit
= $6,250
Therefore, choice C is the best answer.

Zuniga Ltd Uses a Process Costing System