Krumbly Corporation uses the first-in, first-out method in its process costing system. At the beginning of the month, Department D's work in process inventory contained 2,000 units. These units were 100% complete with respect to materials and 40% complete with respect to conversion costs, with a total cost at that point of $13,600. During the month, conversion costs amounted to $8 per equivalent unit. If all 2,000 units are fully complete by the end of the month and transferred out of the department, the total cost of the 2,000 units transferred out will be closest to:

A) $9,600
B) $19,600
C) $23,200
D) $16,000

Question

patrick amedu · Accepted Answer

Final Answer : C, Explanation :  To determine the cost of the 2,000 units transferred out, we need to calculate the equivalent units and the total cost incurred during the month.Equivalent units for materials:2,000 units x 100% complete = 2,000 equivalent unitsEquivalent units for conversion costs:2,000 units x 40% complete = 800 equivalent units2,000 units x 60% complete = 1,200 equivalent unitsTotal equivalent units for conversion costs = 2,000 equivalent unitsTotal cost incurred during the month:Beginning work in process inventory: $13,600Conversion costs: 2,000 equivalent units x $8 per equivalent unit = $16,000Total cost incurred during the month: $29,600Cost per equivalent unit:($13,600 + $16,000) / 2,000 equivalent units = $14.80 per equivalent unitCost of 2,000 units transferred out:2,000 equivalent units x $14.80 per equivalent unit = $29,600However, since the question only asks for the cost of the 2,000 units transferred out, we need to subtract the cost of the beginning work in process inventory that has not been transferred out yet:$29,600 - $13,600 = $16,000Therefore, the total cost of the 2,000 units transferred out will be $16,000. The answer is C.

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