Natasha Corporation's Shaping Department had no beginning inventory and completed and transferred to finished goods 920 units during May.Ending inventory for May contained 80 units that were 30 percent complete as to conversion costs and 100 percent complete as to direct materials costs.The charges to the Shaping Department during May were $3,776 for conversion costs and $2,500 for direct materials costs.Compute the cost of work transferred out if Natasha Corporation uses the FIFO costing method.
A)$6,180
B)$5,980
C)$5,774
D)$6,118

Question

Quizplus · Accepted Answer

Under the FIFO method, the cost of work transferred out is calculated by considering only the costs incurred during the current period. The total cost for May is $3,776 (conversion) + $2,500 (materials) = $6,276. The equivalent units for conversion are 920 + (80 * 0.3) = 944. The cost per equivalent unit for conversion is $3,776 / 944 = $4.00. The cost per unit for materials is $2,500 / 1,000 = $2.50. The cost of work transferred out is (920 units * $4.00 conversion) + (920 units * $2.50 materials) = $5,980.

Natasha Corporation's Shaping Department Had No Beginning Inventory and Completed