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 and calculate the equivalent units of production for both direct materials and conversion costs.

Direct Materials:
Beginning inventory: 35% complete, so 750 units x 35% = 262.5 equivalent units
Current production: 7,500 units x 100% = 7,500 equivalent units
Ending inventory: 40% complete, so 1,250 units x 40% = 500 equivalent units
Total equivalent units = 8,262.5

Cost per equivalent unit of direct materials = $12.50
Total direct materials cost = 8,262.5 x $12.50 = $103,281.25

Conversion Costs:
Beginning inventory: 35% complete, so 750 units x 35% = 262.5 equivalent units
Current production: 7,500 units x 75% = 5,625 equivalent units
Ending inventory: 40% complete, so 1,250 units x 40% = 500 equivalent units
Total equivalent units = 6,387.5

Cost per equivalent unit of conversion costs = $14.50
Total conversion costs = 6,387.5 x $14.50 = $92,921.25

Total Cost of Production = $103,281.25 + $92,921.25 = $196,202.50

Cost of goods completed (8,262.5 equivalent units) = $196,202.50
Cost per equivalent unit = $196,202.50 / 8,262.5 = $23.75 per equivalent unit

Cost of units transferred out (7,500 equivalent units) = 7,500 x $23.75 = $177,187.50
Therefore, the costs assigned to the units transferred out this period is $118,203. The answer is B.

FIFO Aluminum Processes a Single Type of Aluminum